Stock Exchange Trading

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The term 'Stock Exchange Trading' suggests the exchange of stocks or shares, or other securities of companies that are carried forward by brokers or traders of stocks. Parties concerned with stock trading can be an individual or a company. The market for such exchanges is called Stock Exchange.

A stock exchange is the chief component of a stock market. Supply and demand forces in stock markets is guided by various factors which, as in all free markets, affect the price of stocks.

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 involved in Stock Exchange Trading include:

  • Shares issued by companies
  • Unit trusts
  • Other pooled investment products like bonds

In order to indulge into Stock Exchange Trading, a company has to enlist itself under a stock exchange. Usually there is a central location at least for record keeping. However, riding the success of technology, modern markets are electronic networks have raised the speed and cost of transactions.

Stocks and bonds are offered initially to investors is done in the primary market. Henceforth, trading is carried out in the secondary market.

This is the usual way that bonds are traded. Trading at stock exchanges is gradually becoming a part of a global market for securities.

Stock Exchange Trading has multiple roles in the functioning of an economy. Such diverse roles played by stock exchanges include, generation of initial capital required for starting a business, channelizing savings for further investment, facilitating growth of a company, redistributing funds of the company, and creating investment opportunities for small investors.

Stock Exchanges act as barometers of the economy since the movement of share prices and in general of the stock indexes indicate the general trend in the economy.

Thus despite involving a tremendous amount of risk, Stock Exchange Trading is gaining popularity day-by-day.

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