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Getting to Know the Stock Market: How it Works

A Stock Market is a public entity for the trading of a company's shares and derivatives at an agreed price. Many companies allow the public to buy part of its company through selling shares. A share is a piece of paper stating that you own part of a company. The amount you buy is usually an extremely small amount, usually about a thousandths percent of the total company. After saving up money to buy a share you go to a broker and see how much of the company you could buy with however much money you have. Than the broker will tell you how many shares you can buy for "x" amount of money. When a broker buys a stock for you he sends a message to someone who is working down on the floor of the New York Stock Exchange; this person is called the " Floor Broker." A Floor Broker is the actual person who buys the stock for you. Now this person goes to the part of the Stock Exchange that is allotted to this particular stock. Here there are companies that specialize in the particular stock. This means that they will usually, if not always, buy and sell from people at the normal price. The floor broker then buys your shares from one of these people, reports his trade through the hundreds of computers on the floor, then reports to his colleagues back at the brokerage house that he bought the stock. The broker keeps a record that you own that stock, rather than sending you the actual paper stock certificates. If you ever want to sell them, your broker will sell them, deduct his commission, and then give you the money. And that is how a Stock Market works.


Article posted February 21, 2012 at 12:29 PM • comment • Reads 47 • see all articles

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