By Jack Landry

If you have an understanding of what a stock market is you will have heard that stocks are traded on the stock market. Have you ever wondered how this process actually comes to pass?

The term trading gives an inaccurate idea to many about what actually happens with your stocks. Stocks are not exchanged like baseball cards, but they are sold for money not for other stocks.

Trading really means to buy and sell in the stock market business. The stock market is a system that has been set up so that tens of millions of stocks can be traded every day.

It is truly a modern wonder and it is a mystery to many of the average citizens as to how the market can handle so many trades every day. Especially with modern technology our markets have become very efficient.

There are a very diverse set of people that are buying and selling their stocks on the stock market. A man can be selling 10 shares of a small company and his trade will need to be handled with the same care and documentation as another man’’s order for 100,000 shares of a large corporation.

The technical details of buying and selling stocks are relatively unimportant to the average investor. Because you will never be buying or selling directly on the exchange floor you usually will not have to worry about the technicalities.

Having a basic understanding of how the market works is very beneficial for the majority of investors to know. Although, there are some average investors that learn the most that they can about the market to feel safer about giving a stranger control of their investment.

Basically, there are two ways in which you can buy or sell stock. You can either execute a trade on the exchange floor or electronically.

The NASDAQ has become a very popular market in which investors can electronically trade. There are other markets that are resisting the switch to electronic trading and instead are keeping all trades on an exchange floor.

So, what is an exchange floor? The majority of average citizens picture the exchange floors to be exactly what is portrayed on TV shows and movies.

When looked at from this perception the exchange floor is full of professionals running around yelling and gesturing at each other, talking on phones, watching monitors and using the different terminals to enter in data.

The chaos that is represented in these views is a very accurate picture of what actually happens on the exchange floors. Although there may be minor differences in the picture that the media has painted of the exchange floors seems to hold true.

Through all of the chaos the people somehow seem to get all of their trading in for the day and have everything worked out. These people accomplish their tasks quickly and efficiently and then prepare for another chaotic day.

There is a normal process for stocks to be bought and sold on the exchange floor. Let’’s say that you are looking to buy 100 shares of company X.

You would call your local broker and tell him or her that you want to buy 100 shares of company X. The department of your broker’’s office that deals with orders will then send your order to the clerk that is representing your broker on the exchange floor.

The floor clerk then alerts your firm’’s floor traders. The floor trader will then find another floor trader from a different firm that is looking or willing to sell 100 shares of our company X.

This may sound that it is a very overwhelming task because of the sheer number of floor traders. It is a little simpler than it sounds because the traders have a certain area in which they know to look for different businesses and sellers or buyers.

Your buyer and the seller will then discuss prices and close a deal. After the floor trader has bought your shares he will inform the floor clerk, who will inform your broker who will then inform you of the final buying price.

Electronically the process is much different. There is a large network to place buyers with sellers instead of having a single person try to find the best deal for their client.

If the system is functioning well this whole process will happen quickly and efficiently without you having any knowledge of the process. This is why so many people trust in this process and invest in stocks.

About The Author

Jack R. Landry has worked in financial services for the last 12 years and written hundreds of articles about investing. He recommends (http://www.OptioneerTrading.com) for investing advice.

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