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How The Stock Market Works

Todays Date: November 16, 2018

If you want to have an equity position in a company or wish to divest yourself of a stock, you will need a place to transact that business. The stock market is the venue to conduct buying and selling of stock tips and stock derivatives. The marketplace can be a physical location, or it can be accessed electronically. The New York Stock Exchange is one such example of a stock market.

The first stock market can be tracked to ancient Rome. The Roman government offered up for bid contracts for projects. Those assuming the contracts were the “publicani.” These were groups that made available to investors shares in their organizations. In 1606, the Dutch East India Company was the first organization to issue stock after the Middle Ages. Many consider it to be the first multinational corporation.

Today, there is no other stock exchange larger than the New York Stock Exchange. If you were to add up the total stock value of all its listed stock, you would come up with a market capitalization in excess of 25 trillion dollars. The NYSE has grown tremendously since its origins on Wall Street in New York City in 1792. In fact, the volume of shares traded daily can exceed 2 billion, the value of which can exceed $41 billion.

A bull market is music to an investor’s ears. Owners of stock can reap substantial profits during this “uptime” in the market. On the other hand, a bear market can result in heartburn for investors caught in the middle of a downturn. The level of profit or loss depends on the number of shares held.

One of the most catastrophic events in the history of the NYSE began on Black Thursday. On October 24 of 1929 the value of most stocks dropped precipitously. This led to a selling panic five days later, a date which came to be known as Black Tuesday. The market value of company shares dropped by fourteen billion dollars. The “Crash” was a prime factor in ushering in the Great Depression.

The Internet has had a substantial effect on stock markets. Today investors can execute their orders electronically, straight to the exchange’s floor. Regardless, however, of how a stock is traded, bulls and bears will always be present.

For more on the stock market subscribe to the WallStreetWindow stock trading newsletter written by Mike Swanson.

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