The most common picture that comes to mind when people hear about stock trading is the one we see in movies where men in suits basically shout and wrestle each other in some huge New York building to bicker about money. Although to some extent, there is some truth to this image, trading in the stock market is actually a more complex concept that helps many people earn money and keep businesses alive.

The concept of trading fundamentally consists of the buying and selling of stocks among individuals or companies through brokers. Through buying a share of stock or a share of ownership in a particular company, an individual can then benefit and earn money from however the company they invested on may fair in the market.

There are two basic methods in which the stock market operates –on the exchange floor where buying and selling is done more traditionally and electronically where technology takes on the exchange game.

Trading On The Exchange Floor

The trading that occurs on the more traditional exchange floor of the New York Stock Exchange (NYSE) is basically what most of us have become accustomed to from seeing it in the movies and on television. Basically, the NYSE consists of many brokers who negotiate the deals for individuals to be able to trade stocks.

As chaotic as the stock exchange floor may seem, there is actually a common pattern that occurs among most simple trades. First, an order to buy a certain number of stocks would be negotiated through a broker. After this, the broker’s order department would forward this arrangement to their floor clerk on the exchange. The floor clerk would then inform the company’s floor traders in order to find other traders that are willing to sell the equal number of stocks from the company that is offered to be bought. After the two parties agree on a price and close the deal, the message would be forwarded back up the line, and the broker would then inform the interested buyer on the final price.

Negotiations may take a few minutes or even longer, depending on the performance of the stocks as well as the market. For more complex trades and larger orders of stocks however, there may be a more complicated process but the principles basically remain the same.

Trading Electronically

A growing trend these days however, is trading stocks electronically, which is done through advanced computerized systems. Unlike the NYSE that generally operates through the manpower of brokers, its counterpart, the National Association of Securities Dealers Automated Quotations (NASDAQ), trades stocks completely through electronic means.

These electronic markets forgo with human stockbrokers and instead make use of advanced computer networks to match buyers and sellers. And through this method, transactions are usually faster and more efficient.

Through electronic trading, investors get many benefits such as being able to get faster confirmations, as well as facilitating control by having online investing readily available through the Internet. However, brokers basically still handle the trades, as investors do not have direct access to the electronic markets.

The process that takes place in both methods however, is usually hidden from investors. Typically, if you are an investor, a call from your broker and regular reports on your stock investments would be provided for you, but you will not really get to see what is happening behind the scenes.

Through the investments that individuals make, many businesses are kept afloat and running. And in exchange for this, investors get a fair share of earnings. Stock trading may be a complex process, but at the end of the day, many people basically benefit from all of it. As a result, the whole concept becomes simple.

The stock market is a great arena for people to make a lot of money, however, for many beginners, all the hustle and bustle of stock trading may cause a lot of confusion, especially if you are not familiar with the many terms and tactics used for negotiations.

If you are a beginner in the stocks game, make sure that you familiarize and educate yourself well on stock trading knowledge. You can of course, start off by widening your vocabulary. Here are a few terms that you may need to familiarize:

Stocks

Stocks are probably the most important and common items traded in the stock market. These are actually shares of certain companies, which are publicly sold and traded.

Whenever people buy a portion of stock in a particular company, this means that they acquire a share of ownership and investing in that specific business. Through this, a stockholder is given certain rights towards the company such as a vote in stockholder meetings as well as his or her financial share from the company’s earnings.

Broker

A stockbroker is the person who handles the actual trading of stocks. He or she does the negotiations to buy and sell the stocks in behalf of the investors and the companies involved. The many various types of brokers may include full-service, online, auto-trade and discount brokers.

Bull Market

A bull market is a market that manifests a continuous increase in the value of its stocks as well as a steady growth. Generally, with this type of market, investors gain an optimistic attitude and may want to buy more rather than sell stocks.

Bear Market

Bear markets mainly characterize significant losses and declines in a particular market. With this type of behavior among stocks, most investors would generally want to sell more of their stocks and may be pessimistic about investing.

Dividends

Dividends are added or bonus payments given to stockholders after a profitable quarter. With this sum of money, many people may often reinvest on more shares of stock, which allows individuals to earn so much.

Futures

Futures, just like stocks, are also traded in the market. However, these are purchased against future costs of commodities. You can earn from these, if in time, the actual price of commodities become higher than what you paid for the futures. On the other hand, you can also lose money if the price becomes lower that what you paid for.

Day Trader

A day trader is the person who buys and sells stocks aggressively in one day. Usually, he or she does this for several times each day in order to make quite a few small profits within the day.

Trading on Margin

Trading on margin may be similar to trading stocks with the use of borrowed money. Through this, you can purchase shares of stock for only a portion of the actual price. The remainder of the cost can be paid upon the actual sale of the particular stock, or on a later date.

These terms are only a few of the most commonly used language in stock trading. And upon encountering them, you may certainly have the impression of how intimidating the stock market can get. With the many complicated terminologies and tactics, you may easily get backtracked if you do not know enough about what you are dealing with.

Remember that if you are new at doing business in this arena, make sure that you take the extra mile to learn more about more terms as well as strategies on how you can best maximize profit. A little hard work will certainly get you far, and one of these days you will realize how all of this can pay off.