Two Basic Methods When Trading in Stocks

Two Basic Methods When Trading in Stocks

The words “trading in stocks” are very familiar and yet it does not give a clear picture of what are involved in the process.  Here are the two basic methods involved in trading:

Exchange Floor Trading

The New York Stock Exchange or NYSE is very familiar on television and in the movies. Remember Gordon Gekko in Wall Street? Thanks to these push of the media, the stocks exchange always gives way to images of a crowded room where hundreds of men and women shout and gesture to one another while they are on the mobile, watching the numerous monitors on the wall, endless input and encoding of data on their terminals, shouts of “sell” and “buy,” and when the crowd disperses, hundreds of small pieces of paper are left for the janitors to clean up. Not only that, you would be left with images of Tom Hanks losing all of his money in Bonfire of the Vanities.

The NYSE makes it possible for the investor to instruct their brokers to buy a certain number of shares who will send the order off to the floor clerk who will alert the firm floor trader to find another one who would be willing to sell their shares. When the two agree on the price they immediately close the deal and a notification would be sent to the broker who will inform the investor on the final prices. When it is done, the information of the sale will be sent by mail.

Electronic Trading

This involves utilizing the internet. No longer will the telephone be required, simply, the investor clicks in an order and immediately the confirmation of the sale is done. Of course there will still be a broker who will handle the trade because only brokers can access the markets. The difference is that the transaction is done faster and on real time.

Two Basic Methods When Trading in Stocks
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