The objective of a stock market is to facilitate the exchange of securities or stocks between buyers and sellers, by reducing the risks of investing. One can only imagine how difficult it would be to sell shares of a stock if you had to call around your city trying to find a buyer for the stock when you are ready to sell it. A stock market is nothing more than a sophisticated flea market linking buyers and sellers of stocks. It is important to understand how stock markets work before you begin to trade stock markets.
Before beginning to trade stock markets you must first understand the difference between the primary market and the secondary market. The primary market is where securities are created (by means of an IPO) while, in the secondary market, investors trade previously-issued securities without the involvement of the companies issuing the stocks. The secondary market is generally what most people refer to when they talk about the stock market. It is important to understand that the trading of a company's stock does not directly involve that company. Most investors trade stock markets on the secondary market. Here is a list of some the most popular stock exchanges in the world. As an investor you can trade stock markets as a whole to get a lot of diversity in your portfolio or you can select individual stocks to trade on each stock exchange. The World Stock Market Watch to the left can give you a good indication of how is stock exchange is currently performing and more information to guide you in how to trade stock markets. Here is a list below of some of the most popular stock exchanges.
The New York Stock Exchange
One of the most widely known and prestigious stock exchanges in the world is the New York Stock Exchange (NYSE). Is was founded over 200 years ago in 1792 with the signing of the Buttonwood Agreement by 24 New York City stockbrokers and merchants. Currently the NYSE, with stocks like General Electric, McDonald's, Citigroup, Coca-Cola, Gillette and Wal-mart, is the market of choice for the largest companies in America.
The Dow Jones Industrial Average (DJIA)
Also known as the "Dow Jones" or "The Dow", is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the Nasdaq. The DJIA was invented by Charles Dow back in 1896. The DJIA is the oldest and single most watched index in the world. The DJIA includes companies like General Electric, Disney, Exxon and Microsoft.
Standard & Poor's 500 (S&P 500)
The S&P 500 is one of the most commonly used benchmarks for the overall U.S. stock market. The Dow Jones Industrial Average (DJIA) was at one time the most renowned index for U.S. stocks, but because the DJIA contains only 30 companies, most people agree that the S&P 500 is a better representation of the U.S. market. In fact, many consider it to be the definition of the current stock market.
The term "Nasdaq" used to be capitalized "NASDAQ" as an acronym for National Association of Securities Dealers Automated Quotation. The acronym is no longer used and Nasdaq is now a proper noun.
The Nasdaq is traditionally home to many high-tech stocks, such as Microsoft, Intel, Dell and Cisco.
The Nasdaq is a computerized system that facilitates trading and provides price quotations on more than 5,000 of the more actively traded over the counter stocks. Created in 1971, the Nasdaq was the world's first electronic stock market.