Stock Exchange & Trading

Mutual Funds more Safer

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Money market funds, which are a type of mutual fund (other common funds focus on bonds or stocks), are a great place to keep your extra savings. Money market funds are a higher yielding alternative to bank savings and bank money market deposit accounts. Money market funds are unique among mutual funds because they do not fluctuate in value and maintain a fixed $1 per share price. As with a bank savings account, your principal investment in a money market fund does not change in value while you're earning dividends (same as the interest on a bank account). However, money market mutual funds offer several significant benefits over bank savings accounts. The biggest advantage is higher yields.

Money market mutual funds are able to pay higher yields because they don't have the high overhead that banks do. The most efficient mutual fund companies, such as Vanguard, T. Rowe Price, and USAA, don't have scads of branch offices on every street corner. Another reason that banks pay lower yields is that they know that many depositors, perhaps including you, believe that the FDIC insurance that comes with a bank savings account makes it safer than a money market mutual fund.

Another advantage of money funds over bank accounts is that money funds come in a variety of tax-free versions. So if you're in a high tax bracket, tax-free money funds offer something bank accounts don't. Most mutual fund companies require that the checks that you write be for larger amounts - typically at least $250. They don't want you using these accounts to pay all your small household bills because checks cost money to process.

Stock Market Cycle

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The stock market ordinarily bottoms out while business is still on a downtrend, anticipating economic events months in advance. Analysts refer to this phenomenon as "discounting of the future." In like manner, bull markets frequently top out and turn down before economic recession begins. Ironically, economists also have a rather faulty record of predicting the economy. A few of our U.S. presidents, themselves lacking sufficient understanding of the American economy, have had to learn this lesson the slow, hard way. Around the beginning of 1983, just as the economy was in its first few months of recovery, the head of President Reagan's Council of Economic Advisors was a little concerned because the capital goods sector was not very strong. This was the first possible hint that this particular advisor might not be as thoroughly sound as he should be, because capital goods demand is never good at the early stage of economic recovery, and particularly so in the first quarter of 1983, when American plants were operating at a low percentage of capacity.

You should check earlier cycles to learn the sequence of industry group moves at various stages of the market. For example, railroad equipment, machinery, and other capital goods industries are late movers in a business or stock market cycle. This knowledge can help you determine what stage of the current market period you are in. When these groups start running up, you know you're near the tail end. Almost always, the really big money is made in the first one or two years of a normal new bull market's upward movement. This, then, is the point in time you must recognize as soon as possible and fully capitalize upon while the golden opportunity is there. The remainder of the up cycle usually consists of back and forth movement in the market averages, followed by a bear market.

Ways for Successful Wealth Creation

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Know your business to stay in business. This is the general rule when you go into business so that you can make plans and have control of it. The key word here is “know” which stresses the importance of financial and technical skills because everything about the business starts and evolves in your mind.

Education is the foundation of success, and learning is a never ending process. Keep up with the real world. Creating wealth takes persistence, determination, and good old common sense. Your mind is the most powerful tool in creating wealth. Keep it busy thinking and creating ideas. Engage it in mental exercise often. Set your mind to creating wealth and you will be constantly in this direction. Information is power and it is vital to creating wealth. Determine how to earn more in less time. Know how to take risks intelligently and decisively. Stay on top of fear. Do not let it overwhelm you. Opportunities come and go. Learn to spot them. Earn to learn. Use money to make more money. Be generous in giving. You will receive many folds over. Create and concentrate on your own business.

Even a time of uncertainty can be a time of opportunity. Take this as an example: Fuel prices are dictated by market forces, law of supply and demand. In countries where transportation facilities are dependent on fuel, transportation expenses of commuters become prohibitive when fuel prices rise. Commuters are forced to find other means of transportation that are cheaper. Bicycles, motorcycles, and scooters are the next best thing.

Knowing Stork Market

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Gain more financial ability is simply having more options for opportunities that come your way. In the same manner, a higher level of knowledge can help you spot opportunities other people don’t see. What you can’t see with your eyes, you might see with your mind. Money comes and goes. But unlike money (although this is what we’re aiming for), financial knowledge stays. The nourishment it needs to stay keen is to keep it accurate and up-to-date.

If you feel like you’re being pushed around, stay smart, exercise self-discipline, and keep updated. Be alert and look out for “double standard” information (information that requires double checking). It is better to reconfirm than be sorry later. The basics of financial knowledge should have been taught in school; but it hardly did, and it looks like it hardly will. This explains why the poor and middle class comprise the majority of the populace with its gap from the rich ever widening.

Tips for HYIP

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Invest only what you can afford to lose. This is the NUMBER ONE rule. Do not pin all your hopes on an HYIP program. It’s not a stable investment, as you stand to lose everything in one fell swoop. Use only the amount of money that you can afford to lose, otherwise, your entire budget will be screwed when bad times befall you.

Take off your money as soon as possible. With HYIPs, you’ll have to draw money from your own account, at least initially. For example, you’re asked to invest $100 for a $150 return after ten days. This means that in 20 days, if you’d reinvest the first amount you’ll receive, you’d have a profit of $100. Immediately take off the $100 you invested and play with your profit instead. This way, you’ll only lose what you have already earned, and you won’t have to risk what you worked hard for in other avenues.

Study the system behind the HYIP. Is it credible? Does it have a great management team? And most importantly, is the program itself sustainable. Most HYIPs do not play with any assets. As such, they’re just playing with the investments they’re receiving. Eventually, with all the profit margins they will be feeding, they’ll reach a breaking point. The trick is in finding an HYIP with a formidable plan, or at the very least, with real assets to back it up.

Softwares for Stock Market Investments

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A good stock market investing software can be worth its weight in gold if used properly. Stock market software will analyze stock picks by using a combination of real time and historical quotes. This software is also capable of accepting imported data such as earnings estimates and forecasts. There are many types of stock market investing software out there. There are a few things that you should take into consideration before purchasing stock market investing software.

The first thing you should consider is the ease of use. You want to choose software that is easy to use and compatible with your lifestyle. If the software seems too complicated or time consuming, keep searching. When you have your software packages narrowed down to just a few choices, do some investigations. Search the Internet for consumer reviews of the software that you are considering. Check out the investing forums and see what other people have to say about the software. If the software is getting a lot of bad reviews, drop it and try another one.

If you can get your software narrowed down to just two choices then test drive each one. A lot of stock market investing software companies will let you try their software for free for a limited time. Use this offer to your advantage to help you make an informed decision before you purchase the software. Have a list of things that you want your software to do and compare each one against the list. Once you have compared the two stock investing software packages and have made your decision, shop around a bit to get the best price. The Internet is a great place to find fantastic bargains.

Basics of Stock Markets

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Be on the lookout for good growth industries. It is always good to get in on the ground floor of a great investment before the price of the stock starts to rise. The better you get at research, the easier it will be to find these opportunities. Spread your stock around. Don't invest all of your money into one stock. If one stock goes down, another stock could be rising. Diversify your stock portfolio to decrease your risk of losing your investments. Check into overseas investments also. The Internet and today's globalized economy makes if very easy to invest in international shares.

Go online with your trading accounts. The fees are lower than the standard brokerage house and you will have instant access to trading information and to all of your accounts. Keep a close eye on the companies that you have investments in. Check their websites regularly for news or any other event that may change the price of stock. Become a regular reader of the business section of the newspaper also. You should never depend on the stock price only for the performance of your stock portfolio. These are just some basic tips for getting started investing in the stock market. Study the stock market and investing before you actually start. The stock market can be a crazy place sometimes and the better informed that you are, the less you will lose.

Growth Investments

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Growth investing is investing in companies that are showing signs of growth with the idea that they will continue to grow. These investors closely monitor companies that are growing, buy their stocks and then sell the stock for profit while the company is still on the uphill climb. The key here is timing. While the stock may not have reached it's full potential, you want to sell before it starts to fall again. This will give you the best return on your investment.

But investing in growth stocks has it's challenges. You have to take into consideration that as the company gets bigger it has to do more to achieve growth. A company may have 40 locations starting out, but ten years later they may 1400 locations. To keep a good rate of growth, they are going to have to open thousands of locations each year.

Think about what happens when a company starts to grow. The competition heats up and other companies will get into the act. Competition will put a crimp in your profits. While there may be a few companies that are immune to the competition, they are very hard to find. The first thing to do is to always be on the lookout for companies with good growth potential but don't get sucked into paying a steep price. This will eat into your returns.

Work to find a business that has solid barriers against competition. Don't worry if the growth return rate isn't very high. This type of business will be around longer and sustain superior long-term returns. Look for companies that have high quality, unique, products that will be hard to emulate. This will keep the competition low for some time, leading to years of great returns on your investment.

Research is the key. Having a good eye and instinct for growth companies that will stand the test of time doesn't hurt either. Look at a companies product. Try it out for yourself. Get a plan of what that particular company is going to do in the future to sustain growth. Pick the plan apart and analyze it thoroughly. There is no guarantee that investing in a growth stock will make you a ton of money. But it will help a lot if you do your homework and become well informed before you buy.

Investing in Penny Stocks

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The first thing you should do is plenty of research about investing in penny stocks. Learn the terminology and learn how to read the pink sheets. Be very careful of the penny stocks that you choose to invest in. Read manual's such as Moody's and Standard and Poor's to get accurate current financial information on the companies that you are investing in.

High pressure sales techniques. Investment in a good legitimate company is a long term process. It is not going to skyrocket overnight. You should have a few weeks to decide if a stock is right for you. If anyone tries to pressure you by saying otherwise, walk away.

Not knowing how the money is being spent. If a company cannot inform you of exactly what they are spending your investment money on, with documentation, then it is best to steer clear of them.

Keep a close eye on your accounts and be on the lookout for securities that you did not agree to purchase. Some brokers will try to pressure you into buying the stock after it is fraudulently placed in your account.

Investing in penny stocks is a gamble. Millions of dollars are lost each year in the penny stock market. But if you do your research and really study the market, you can make a decent amount from penny stock investing. Knowledge is the whole key to success in the penny stock markets.

Tips for Day Trading

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Always try your best to keep your emotions under control. Day trading can lead to a lot of hype and excitement. Some people will tend to trade on impulse before evaluating the trade. Big mistake. Never trade on impulse. Control yourself and carefully evaluate each trade before you make it. Don't get caught up in the excitement and lose your investments.

Follow the flow of the trade. Don't go against the odds hoping for that big score. Focus on the high selling stocks and dump those short selling stocks. Trust in the law of averages here and hold to the belief that the stocks will continue to rise.

When you lose, don't take it personally. Evaluate where you might have went wrong and move on. Turn the situation into a learning experience and build on each experience until you are consistently making positive trades and generating profits.

Day trading is not for everyone. If you think that going into day trading is going to make you a millionaire within a few months, you had better think again. Day trading can be profitable but you have to know what you are doing. Read everything that you can find on day trading. Browse the Internet for tutorials. Some sites will even let you practice day trading before you go live. You will use pretend money and practice your trades to see if you really are getting the hang of it before you invest your own hard earned cash.

Opportunities by Investment

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As opposed to other businesses that require huge capital outlay, investing in shares is open to both the large and small stock investors because a person buys the number of shares they can afford. Therefore the Stock Exchange provides the opportunity for small investors to own shares of the same companies as large investors. Governments at various levels may decide to borrow money in order to finance infrastructure projects such as sewage and water treatment works or housing estates by selling another category of securities known as bonds. These bonds can be raised through the Stock Exchange whereby members of the public buy them, thus loaning money to the government. The issuance of such municipal bonds can obviate the need to directly tax the citizens in order to finance development, although by securing such bonds with the full faith and credit of the government instead of with collateral, the result is that the government must tax the citizens or otherwise raise additional funds to make any regular coupon payments and refund the principal when the bonds mature. At the stock exchange, share prices rise and fall depending, largely, on market forces. Share prices tend to rise or remain stable when companies and the economy in general show signs of stability and growth. An economic recession, depression, or financial crisis could eventually lead to a stock market crash. Therefore the movement of share prices and in general of the stock indexes can be an indicator of the general trend in the economy.

Stock Exchange Work

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The Stock Exchange provides companies with the facility to raise capital for expansion through selling shares to the investing public. When people draw their savings and invest in shares, it leads to a more rational allocation of resources because funds, which could have been consumed, or kept in idle deposits with banks, are mobilized and redirected to promote business activity with benefits for several economic sectors such as agriculture, commerce and industry, resulting in a stronger economic growth and higher productivity levels. Companies view acquisitions as an opportunity to expand product lines, increase distribution channels, hedge against volatility, increase its market share, or acquire other necessary business assets. A takeover bid or a merger agreement through the stock market is one of the simplest and most common ways for a company to grow by acquisition or fusion. Stocks exchanges do not exist to redistribute wealth although casual and professional stock investors through stock price increases (that may result in capital gains for the investor) and dividends get a chance to share in the wealth of profitable businesses. By having a wide and varied scope of owners, companies generally tend to improve on their management standards and efficiency in order to satisfy the demands of these shareholders and the more stringent rules for public corporations imposed by public stock exchanges and the government. Consequently, it is alleged that public companies (companies that are owned by shareholders who are members of the general public and trade shares on public exchanges) tend to have better management records than privately-held companies (those companies where shares are not publicly traded, often owned by the company founders and/or their families and heirs, or otherwise by a small group of investors). However, some well-documented cases are known where it is alleged that there has been considerable slippage in corporate governance on the part of some public companies (Pets.com (2000), Enron Corporation (2001), One.Tel (2001), Sunbeam (2001), Webvan (2001), Adelphia (2002), MCI WorldCom (2002), or Parmalat (2003), are among the most widely scrutinized by the media).

Trading

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Participants in the stock market range from small individual stock investors to large hedge fund traders, who can be based anywhere. Their orders usually end up with a professional at a stock exchange, who executes the order.
Some exchanges are physical locations where transactions are carried out on a trading floor, by a method known as open outcry. This type of auction is used in stock exchanges and commodity exchanges where traders may enter "verbal" bids and offers simultaneously. The other type of exchange is a virtual kind, composed of a network of computers where trades are made electronically via traders. Actual trades are based on an auction market paradigm where a potential buyer bids a specific price for a stock and a potential seller asks a specific price for the stock. (Buying or selling at market means you will accept any ask price or bid price for the stock, respectively.) When the bid and ask prices match, a sale takes place on a first come first served basis if there are multiple bidders or askers at a given price. The purpose of a stock exchange is to facilitate the exchange of securities between buyers and sellers, thus providing a marketplace (virtual or real). The exchanges provide real-time trading information on the listed securities, facilitating price discovery. The New York Stock Exchange is a physical exchange, also referred to as a listed exchange--only stocks listed with the exchange may be traded. Orders enter by way of exchange members and flow down to a specialist, who goes to the floor trading post to trade stock. The specialist's job is to match buy and sell orders using open outcry. If a spread exists, no trade immediately takes place--in this case the specialist should use his/her own resources (money or stock) to close the difference after his/her judged time. Once a trade has been made the details are reported on the "tape" and sent back to the brokerage firm, which then notifies the investor who placed the order. Although there is a significant amount of human contact in this process, computers play an important role, especially for so-called "program trading". The NASDAQ is a virtual listed exchange, where all of the trading is done over a computer network. The process is similar to the New York Stock Exchange. However, buyers and sellers are electronically matched. One or more NASDAQ market makers will always provide a bid and ask price at which they will always purchase or sell 'their' stock.[2].
The Paris Bourse, now part of Euro next, is an order-driven, electronic stock exchange. It was automated in the late 1980s. Prior to the 1980s, it consisted of an open outcry exchange. Stockbrokers met on the trading floor or the Palais Brongniart. In 1986, the CATS trading system was introduced, and the order matching process was fully automated. From time to time, active trading (especially in large blocks of securities) have moved away from the 'active' exchanges. Securities firms, led by UBS AG, Goldman Sachs Group Inc. and Credit Suisse Group, already steer 12 percent of U.S. security trades away from the exchanges to their internal systems. That share probably will increase to 18 percent by 2010 as more investment banks bypass the NYSE and NASDAQ and pair buyers and sellers of securities themselves, according to data compiled by Boston-based Aite Group LLC, a brokerage-industry consultant [citation needed].

Indian Stock Exchange

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The Indian stock market mainly known as of the Bombay Stock Exchange and the National Stock Exchange. The market is one of the fast growing emerging markets in the world, and the BSE is the oldest stock exchange in Asia. More than 6500 scripts are traded at the BSE and more than 2500 scripts are traded at the NSE. It contains different kind of markets : 1 metal market 2 oil market 3 banking stock market and lots more

Market Behavior

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NASDAQ in Times Square, New York City. From experience we know that investors may temporarily pull financial prices away from their long term trend level. Over-reactions may occur so that excessive optimism (euphoria) may drive prices unduly high or excessive pessimism may drive prices unduly low. New theoretical and empirical arguments have been put forward against the notion that financial markets are efficient. According to the efficient market hypothesis (EMH), only changes in fundamental factors, such as profits or dividends, ought to affect share prices. (But this largely theoretic academic viewpoint also predicts that little or no trading should take place contrary to fact since prices are already at or near equilibrium, having priced in all public knowledge.) But the efficient-market hypothesis is sorely tested by such events as the stock market crash in 1987, when the Dow Jones index plummeted 22.6 percent the largest-ever one-day fall in the United States. This event demonstrated that share prices can fall dramatically even though, to this day, it is impossible to fix a definite cause: a thorough search failed to detect any specific or unexpected development that might account for the crash. It also seems to be the case more generally that many price movements are not occasioned by new information; a study of the fifty largest one-day share price movements in the United States in the post-war period confirms this. Moreover, while the EMH predicts that all price movement (in the absence of change in fundamental information) is random (i.e., non-trending), many studies have shown a marked tendency for the stock market to trend over time periods of weeks or longer. Various explanations for large price movements have been promulgated. For instance, some research has shown that changes in estimated risk, and the use of certain strategies, such as stop-loss limits and Value at Risk limits, theoretically could cause financial markets to overreact. Other research has shown that psychological factors may result in exaggerated stock price movements. Psychological research has demonstrated that people are predisposed to 'seeing' patterns, and often will perceive a pattern in what is, in fact, just noise. (Something like seeing familiar shapes in clouds or ink blots.) In the present context this means that a succession of good news items about a company may lead investors to overreact positively (unjustifiably driving the price up). A period of good returns also boosts the investor's self-confidence, reducing his (psychological) risk threshold. Another phenomenon also from psychology that works against an objective assessment is group thinking. As social animals, it is not easy to stick to an opinion that differs markedly from that of a majority of the group. An example with which one may be familiar is the reluctance to enter a restaurant that is empty; people generally prefer to have their opinion validated by those of others in the group. In one paper the authors draw an analogy with gambling. In normal times the market behaves like a game of roulette; the probabilities are known and largely independent of the investment decisions of the different players. In times of market stress, however, the game becomes more like poker (herding behavior takes over). The players now must give heavy weight to the psychology of other investors and how they are likely to react psychologically.

The stock market, as any other business, is quite unforgiving of amateurs. Inexperienced investors rarely get the assistance and support they need. In the period running up to the recent NASDAQ crash, less than 1 per cent of the analyst's recommendations had been to sell (and even during the 2000 - 2002 crash, the average did not rise above 5%). The media amplified the general euphoria, with reports of rapidly rising share prices and the notion that large sums of money could be quickly earned in the so-called new economy stock market. (And later amplified the gloom which descended during the 2000 - 2002 crash, so that by summer of 2002, predictions of a DOW average below 5000 were quite common.)Sometimes the market tends to react irrationally to economic news, even if that news has no real effect on the technical value of securities itself. Therefore, the stock market can be swayed tremendously in either direction by press releases, rumors and mass panic. Over the short-term, stocks and other securities can be battered or buoyed by any number of fast market-changing events, making the stock market difficult to predict.

Risks

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Riskier long-term saving requires that an individual possess the ability to manage the associated increased risks. Stock prices fluctuate widely, in marked contrast to the stability of (government insured) bank deposits or bonds. This is something that could affect not only the individual investor or household, but also the economy on a large scale. The following deals with some of the risks of the financial sector in general and the stock market in particular. This is certainly more important now that so many newcomers have entered the stock market, or have acquired other 'risky' investments (such as 'investment' property, i.e., real estate and collectables). With each passing year, the noise level in the stock market rises. Television commentators, financial writers, analysts, and market strategists are all over talking each other to get investors' attention. At the same time, individual investors, immersed in chat rooms and message boards, are exchanging questionable and often misleading tips. Yet, despite all this available information, investors find it increasingly difficult to profit. Stock prices skyrocket with little reason, then plummet just as quickly, and people who have turned to investing for their children's education and their own retirement become frightened. Sometimes there appears to be no rhyme or reason to the market, only folly. This is a quote from the preface to a published biography about the well-known and long term value oriented stock investor Warren Buffet began his career with only 100 U.S. dollars and has over the years built himself a multibillion-dollar fortune. The quote illustrates some of what has been happening in the stock market during the end of the 20th century and the beginning of the 21st.

Financial systems:

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The financial system in most western countries has undergone a remarkable transformation. One feature of this development is disintermediation. A portion of the funds involved in saving and financing flows directly to the financial markets instead of being routed via banks' traditional lending and deposit operations. The general public's heightened interest in investing in the stock market, either directly or through mutual funds, has been an important component of this process. Statistics show that in recent decades shares have made up an increasingly large proportion of households' financial assets in many countries. In the 1970s, in Sweden, deposit accounts and other very liquid assets with little risk made up almost 60 per cent of households' financial wealth, compared to less than 20 per cent in the 2000s. The major part of this adjustment in financial portfolios has gone directly to shares but a good deal now takes the form of various kinds of institutional investment for groups of individuals, e.g., pension funds, mutual funds, hedge funds, insurance investment of premiums, etc. The trend towards forms of saving with a higher risk has been accentuated by new rules for most funds and insurance, permitting a higher proportion of shares to bonds. Similar tendencies are to be found in other industrialized countries. In all developed economic systems, such as the European Union, the United States, Japan and other developed nations, the trend has been the same: saving has moved away from traditional (government insured) bank deposits to more risky securities of one sort or another.

Importance of Trading

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The stock market is one of the most important sources for companies to raise money. This allows businesses to go public, or raise additional capital for expansion. The liquidity that an exchange provides affords investors the ability to quickly and easily sell securities. This is an attractive feature of investing in stocks, compared to other less liquid investments such as real estate. History has shown that the price of shares and other assets is an important part of the dynamics of economic activity, and can influence or be an indicator of social mood. Rising share prices, for instance, tend to be associated with increased business investment and vice versa. Share prices also affect the wealth of households and their consumption. Therefore, central banks tend to keep an eye on the control and behavior of the stock market and, in general, on the smooth operation of financial system functions. Financial stability is the raison d'être of central banks. Exchanges also act as the clearinghouse for each transaction, meaning that they collect and deliver the shares, and guarantee payment to the seller of a security. This eliminates the risk to an individual buyer or seller that the counterparty could default on the transaction. The smooth functioning of all these activities facilitates economic growth in that lower costs and enterprise risks promote the production of goods and services as well as employment. In this way the financial system contributes to increased prosperity.

History of Stock Exchange

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In 11th century France was concerned with managing and regulating the debts of agricultural communities on behalf of the banks. As these men also traded in debts, they could be called the first brokers. Some stories suggest that the origins of the term "bourse" come from the Latin bursa meaning a bag because, in 13th century Bruges, the sign of a purse (or perhaps three purses), hung on the front of the house where merchants met. However, it is more likely that in the late 13th century commodity traders in Bruges gathered inside the house of a man called Van Burse, and in 1309 they institutionalized this until now informal meeting and became the "Bruges Bourse". The idea spread quickly around Flanders and neighboring counties and "Bourses" soon opened in Ghent and Amsterdam. In the middle of the 13th century, Venetian bankers began to trade in government securities. In 1351, the Venetian Government outlawed spreading rumors intended to lower the price of government funds. There were people in Pisa, Verona, Genoa and Florence who also began trading in government securities during the 14th century. This was only possible because these were independent city states ruled by a council of influential citizens, not by a duke. The Dutch later started joint stock companies, which let shareholders invest in business ventures and get a share of their profits - or losses. In 1602, the Dutch East India Company issued the first shares on the Amsterdam Stock Exchange. It was the first company to issue stocks and bonds. In 1688, the trading of stocks began on a stock exchange in London.

Stock Exchange

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Stock exchange, share market or bourse is a corporation or mutual organization which provides facilities for stock brokers and traders, to trade company stocks and other securities. Stock exchanges also provide facilities for the issue and redemption of securities as well as other financial instruments and capital events including the payment of income and dividends. The securities traded on a stock exchange include: shares issued by companies, unit trusts and other pooled investment products and bonds. To be able to trade a security on a certain stock exchange, it has to be listed there. Usually there is a central location at least for recordkeeping, but trade is less and less linked to such a physical place, as modern markets are electronic networks, which gives them advantages of speed and cost of transactions. Trade on an exchange is by members only. The initial offering of stocks and bonds to investors is by definition done in the primary market and subsequent trading is done in the secondary market. A stock exchange is often the most important component of a stock market. Supply and demand in stock markets are driven by various factors which, as in all free markets, affect the price of stocks.

There is usually no compulsion to issue stock via the stock exchange itself, nor must stock be subsequently traded on the exchange. Such trading is said to be off exchange or over-the-counter. This is the usual way that bonds are traded. Increasingly, stock exchanges are part of a global market for securities