The Stock Markets 

The term “stock market” is often used to refer to the buying and selling of stocks or to the physical location where these activities take place.  When you hear that the stock market was down today or that the stock market was up today, it is referring to the combined activity of the many stock exchanges. 

The proper term for the physical location where the trading of stocks takes place is the stock exchange.  Although a country may have many different stock exchanges, a particular stock is usually traded on only 1 exchange.  Some large corporations may be listed on several exchanges. 

In the United States the major stock exchanges are the New York Stock Exchange (NYSE), the American Stock Exchange (Amex) and the NASDAQ. 

Throughout the world there are a number stock exchanges.  The NYSE stock exchange operates from 9:30 am to 4:00 pm New York time.  Other stock exchanges around the world operate on similar hours based on their local time.  For instance, if you trade on the Hong King Stock Exchange your order will be executed between 9:30 pm and 4:00 am New York time.  It is possible to buy or sell stocks on any of the exchanges. 

Some of the major stock exchanges of the world, in addition to the United States, are: 

Europe – London Stock Exchange, Frankfort Stock Exchange, SWX Swiss Exchange 

Japan – Tokyo Stock Exchange 

India – Bombay Stock Exchange 

The People’s Republic of China – Shanghai Stock Exchange 

A country’s stock market is strongly influenced by the economic health of that country.  Stock prices rise during a period of high economic production, low unemployment and low inflation.  When the economy is doing well the stocks are considered bullish and it is referred to a bull market.  On the other hand, when inflation and unemployment are rising the stock prices are usually falling and this is considered a bear market. 

Supply and demand cause the stock price fluctuations.  When investors see a stock price rise rapidly they may decide to jump on the bandwagon.  This rush to buy drives the stock price up even higher.  The same effect is true, only in the opposite direction, when a stock price is falling.  Investors are quick to sell, and this causes the stock price to drop even lower.  These are short-term fluctuations.  After such runs the stock prices tend to normalize. 

The stock exchange is only 1 of various opportunities for people to invest.  Some other markets include the Futures Market, the Options Market, and the Foreign Exchange Market (FOREX). 

The Futures Market is a market of contracts to buy or sell certain goods at specified times and prices.  The buyers and sellers want to lock in prices for future delivery.  The market conditions can make the future market contract fluctuate considerably in value.  Investors in the future market are interested in  the profit they can realize from trading the contracts. They are not interested in the actual goods.  

The Options Market is similar to the Futures Market.  An option is a contract giving you the right (not the obligation) to trade a stock at a certain price before a specified date. 

The FOREX is the highest investment market in the world in terms of value.  FOREX traders can profit from small changes in the currency value by buying 1 currency against another.  Most FOREX trades are entered into and exited from with 24 hours.   

Unless you have considerable experience and knowledge all three of these markets, Futures, Options and FOREX are considered rather risky.  Close monitoring of market movements is required.  Stocks are considered less risky since movements in the market are usually more gradual.  Most people consider stocks as long-term investments, although short-term investment strategies are possible.