ONLINE TRADING-HOW
A stock exchange can be compared to a warehouse. It is a warehouse in which people sell and purchase stocks. The sell order should match the purchase order and vice versa. This is done either by a computer or by a person. Different exchanges work in different ways; some carry out trading like auctions on a trading floor, while others electronically match interested buyers and sellers. Following are examples of some of the major stock exchanges over the world:
- The Tokyo Stock Exchange
- The NASDAQ-a stock exchange which is electronic
- The New York Stock Exchange-where stocks are traded through auctioning
When stocks are bought and sold in a stock exchange, a broker is needed. Similarly, when this is done on an online market, an online broker is used in place of a human broker. Real money is used in online trading, but the decisions on what to buy and sell are made by the trader himself. He doesn't have to talk to anyone else. He can also request the trades on his own. Live brokers and broker assisted trades may offer advice to the traders if this is a part of an online brokerage's service package. Therefore it is better to choose a brokerage firm that offers these services. This way a trader can get help with his trades.
Apart from purchasing and selling stocks, there are other investments which a person can make online as well. But this depends on what the online brokerage that has been selected offers. Some firms may allow participation in Initial Public Offering (IPO), as well as the following:
- Options-the right to purchase or sell off stock on or before a certain date and at a certain price
- Bonds-providing loans to corporations or businesses. The amount is repaid with interest
- Futures-agreeing to buy or sell stocks in the future and at a certain date
- Mutual Funds-these are companies that accumulate the money people have invested, and subsequently invest the amount it in various different companies
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