The major indices in North America include the Toronto Stock Exchange, CDNX, the Montreal Stock Exchange ( which recently announced it was going to combine with the TSX ), Nasdaq, AMEX and the grandaddy of all : the Dow Jones. Used correctly, the term stock exchange exactly describes what goes on within each of these locations.
For the bulk of north american stock exchanges, theyare open between 9:30am – 4pm, monday to friday.
So what happens at these exchanges? Like any market, there are bidders and sellers trying to haggle over the price of an item, in this example, stocks in a publicly traded company. If the bidders are ready to meet the sellers price, the share price moves higher, while the stock price moves lower if the vendor agrees to the buyers price. Depending on the economy, company fundamentals and current stories, there might be more traders curious about purchasing or selling shares. Often, if there’s a downtrend in the economy, the markets experience a bear market, which implies that even good news is usually discounted, and sellers customarily win the day. In a bull market, bad news is discounted, and good news is usually exaggerated. Think about the dot com bubble back in the late 1990′s.
Investor psychology also plays a role in determining the share price. Greed and fear help to exaggerate share prices. While demand and supply for shares plays a role, there is nothing like old fashion fear of missing the likelihood of a whole life to pump up the share price, or the dread of losing whatever capital is left after there has been bad news to bump the share price even lower.
These fluctuations create possibilities for smart investors.
buying and selling shares arenot the only way to earn income in the stock market. There are more kinds of markets including the foreign exchange market ( currency exchange ), futures market and the Options Market.
The futures market deals with contracts to buy and sell goods at specified prices and times. A farmer as an example, may wish to trade futures based mostly on the future price of corn. This enables him to lock in prices for future delivery. Of course, this may and usually does change on abooked regular[/spin] basis, depending on current events and weather patterns. Most future traders however trade the contract, not the physical goods.
currency exchange is by far the larges investment market in the world today. In simple language forex trading permits an investor to buy currency against the other, providing a potential return for the trader. If you believe the US greenback will gain against the Eurodollar, you can buy US greenbacks and sell if the US dollar in fact gains. Its one of the riskier techniques of investing. Even though it can provide amazing returns, it can leave you in the poorhouse quite as fast.
The Options market gives traders the right, but not the obligation to trade a stock for a certain price, before aconcluded date. Most savvy traders will go long on a stock, but purchase a put option ( fundamentally permitting the trader the right to go short on the same stock ). This provides the necessary insurance incase the stock declines.
A smart investor knows the risks before they invest in the stock market. Whether penny stocks, massive caps or futures, they weigh the risk before making their move.
There is lots of money to be made in the stock market if you know what to go looking for. Its all about knowing the stock market basics first.
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