How To Trade Stocks

How To Trade Stocks

"Trading stocks." You hear that phrase all the time, although it really is wrong. You don’t trade stocks like baseball cards—for example, I’ll trade you 100 IBMs for 100 Intels.

Trade = Buy or Sell

To “trade” in the jargon of the financial markets means to buy and sell. The workings of a system that can accommodate trading of one billion shares in a single day are a mystery to most people. No doubt, our financial markets are marvels of technological efficiency.

Traders and markets must handle an order for 100 shares of Acme Kumquats with the same care and documentation as an order of 100,000 shares of MegaCorp.

You don’t need to know all of the technical details of how to buy and sell stocks, but having a basic understanding of how the markets work is important for an investor.

Two Basic Methods

There are two basic ways exchanges execute a trade:

  • On the exchange floor
  • Electronically

There is a strong push as of December 2017 to move more trading to the networks and off the trading floors, but this push is meeting with some resistance. Most markets, most notably the NASDAQ, trade stockselectronically. However, the futures markets trade in person on the floor of several exchanges, but that’s a different topic.