What is a Stock Market?

A stock market / share market is a public market (a loose network of economic transactions not a physical facility or discrete entity) for the trading of company stock and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately.

The size of the world stock market was estimated at about $36.6 trillion US at the beginning of October 2008. The total world derivatives market has been estimated at about $791 trillion face or nominal value,  11 times the size of the entire world economy.  The value of the derivatives market, because it is stated in terms of notional values, cannot be directly compared to a stock or a fixed income security, which traditionally refers to an actual value. Moreover, the vast majority of derivatives ‘cancel’ each other out (i.e., a derivative ‘bet’ on an event occurring is offset by a comparable derivative ‘bet’ on the event not occurring.). Many such relatively illiquid securities are valued as marked to model, rather than an actual market price.

The stocks are listed and traded on stock exchanges which are entities of a corporation or mutual organization specialized in the business of bringing buyers and sellers of the organizations to a listing of stocks and securities together. The stock market in the United States is NYSE while in Canada, it is the Toronto Stock Exchange. Major European examples of stock exchanges include the London Stock Exchange, Paris Bourse, and the Deutsche Börse. Asian examples include the Tokyo Stock Exchange, the Hong Kong Stock Exchange, and the Bombay Stock Exchange. In Latin America, there are such exchanges as the BM&F Bovespa and the BMV.

Different types of Stock Trading

Swing trading

Swing trading is commonly defined as a stock, index, or commodities trading practice whereby the instrument is bought or sold at or near the end of an up or down price swing caused by daily or weekly price volatility. A swing trade position is typically open longer than a day, but shorter than trend following trades or buy and hold investment strategies. Swing traders engage in prospecting changes in an instrument’s price caused by oscillations between its price being bid up by optimism and alternatively being sold down by pessimism over a period of a few days, weeks, or months. Profits can be sought by engaging in either Long or Short trading.

Day Trading

Day trading refers to the practice of buying and selling financial instruments within the same trading day such that all positions are usually closed before the market close for the trading day. Traders that participate in day trading are called active traders or day traders.

Some of the more commonly day-traded financial instruments are stocks, stock options, currencies, and a host of futures contracts such as equity index futures, interest rate futures, and commodity futures.

Day trading used to be the preserve of financial firms and professional investors and speculators. Many day traders are bank or investment firm employees working as specialists in equity investment and fund management. However, with the advent of electronic trading and margin trading, day trading has become increasingly popular among casual, at home traders.

Trend Following

In finance, trend following is an investment strategy that tries to take advantage of long-term moves that seem to play out in various markets. The system aims to work on the market trend mechanism and take benefit from both sides of the market enjoying the profits from the ups and downs of the stock or futures markets.

Traders who use this approach can use current market price calculation, moving averages and channel breakouts to determine the general direction of the market and to generate trade signals. Traders who subscribe to a trend following strategy do not aim to forecast or predict specific price levels; they simply jump on the trend and ride it.

What to Look for in an Online Stock broker

An online stockbroker should provide you, the investor, with all the resources you need to make educated financial decisions and buy and sell investments using a variety of strategies. Some of these resources include educational materials, real–time charts, streaming news, various high–quality tools and a user–friendly trading platform. New to this review, we added cell phone features. Many services do not yet have cell phone support, but many are adding these features in reaction to the increasing consumer demand for it.

Below are the some criteria to evaluate online stock trading.

Fees/Commissions

Fees and commissions can add up quickly and many services also require additional fees for all kinds of things from transfer fees to check request fees. We compared a variety of fees commonly charged by these types of services; however, some online brokers have a tiered commission schedule based on balance or trade volume.

Investments Offered

Most online stock trading services offer the basics such as stock, options, mutual funds and exchange-traded funds. Many services also offer access to a variety of international markets as well as investment services or packages for retirement and education saving.

Trading/Investment Tools

Online brokers that offer practical tools such as investment calculators, analyst reports, cell phone alerts and useful charts, chains or graphs can help investor make smart buying and selling choices. Since buying/selling stock can be daunting, we feel that good information is vital.

Ease of Use

Investors come from all lifestyles; a superb service accommodates everyone regardless of their knowledge of computers, the Internet or trading online. Accommodations may include a navigational website, in–depth tutorials or one–on–one training.

Support/Customer Service

Trading is complicated and risky, it is extremely important that online stock trading services provide good and immediate customer service by telephone, email, instant and chat and more.

Online Stock Broker Comparison

People who are in search of hassle free and no fraud company are always found to be on the prowl for good, better and the best online stockbroker companies. Today due to high competition various companies have started giving various facilities to the investor along with declining commission rates. Some of the various online stockbroker companies  and online stock broker comparisons are given below.

TD Ameritrade

Special Offers – 30 Days of Free trades and $100 cash

Trade Unlimited Shares (market or limit)
Internet – $9.99
Interactive Voice Responce (IVR) Telephone System – $34.99
Broker-assisted – $44.99

Equity or Index, market or limit orders
Internet – $9.99 + $0.75 per contract
Interactive Voice Response (IVR) Telephone System – $34.99 + $0.75 per contract
Broker-assisted – $44.99 + $0.75 per contract

Scottrade

Trade Unlimited Shares (market or limit)
Internet – $7
Interactive Voice Responce (IVR) Telephone System – $17
Broker-assisted – $27

Equity or Index, market or limit orders
Internet – $7 + $1.25 per contract
Interactive Voice Response (IVR) Telephone System – $17 + $1.25 per contract
Broker-assisted – $27 + $1.25 per contract

ETrade

Special offers – Free BlackBerry® BoldTM For Mobile Pro with a new wireless plan.

Trade Shares (market or limit)
0-150 trades – $9.99
150+ Trades – $7.99

Equity or Index, market or limit orders
0-150 trades – $9.99 plus $0.75
150+ trades – $7.99 plus $0.75

ShareBuilder

Automatic Investments:
Basic: $4 per investment
Standard: 6 per month included, $2 each additional
Advantage: 20 per month included, $1 each additional

Real-time Trades
$9.95 per online trade

Options Trading
$9.95 per online trade + $1.50 per contract

Phone Trades
$19.95 Real-time and Mutual Funds trades

OptionsXpress

Options – $12.95 to $30 depending no of contracts and no of trades per quarter

Stocks
0-8 Trades/Quarter – $14.95 up to 1000 / 1000+ – $0.015/share
9+ Trades/Quarter – $9.95 up to 1000 / 1000+ – $0.01/share