The stock exchange has puzzled many people over the years using its behavior. Not many so called analysts have been able to make predictions that are always right and that is because price movement of stocks are determined by a variety of factors like political developments, economic news, company performance of the stock, influence of foreign institutional buying and so forth. In short, it is just another market that behaves according to the demand and supply existing at a particular point in time. It can be when compared with a big super mall where individuals are either buying or selling stocks. For every buyer, there’s a seller and the other way around.
This transaction of buying and selling of stocks is facilitated with a stock exchange. The New York Stock market is one such example. When compared with earlier times, when you had to be physically present at the exchange to trade stocks, modern trading is done through online trading portals that are owned by brokers and many people have been able to do so from the comfort of their homes.
Let’s explore one example of how a stock trade happens.
You first need to open a trading account with a broker and also a deposit amount with which you can trade inside a specific quantity of shares with respect to the price of the stock you intend to trade in. You then place an order to buy a particular stock in a particular price and the quantity could be say 100. The trading platform will communicate to all networks that a person wants to buy 100 shares of a particular company and this immediately results in an interested seller of this stock to offer 100 shares in the price you desired and the transaction is performed online.
Hundred shares get transferred in the seller’s account for your requirements. Several such trades keep happening through the working hours from the stock exchange on a daily basis and the relevant brokerage fee; taxes to the government and so on are all adjusted online within the trade that is executed.
Now your decision of what stock to purchase is influenced by valuation from the stock and that’s determined by the profits the company is generating, the future potential of the company or the industry and also the time the customer is willing to remain invested in that stock. Those are aspects that merit discussion separately.
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