- December 12, 2021
- Posted by: Robert Brown
- Category: Investing
“Stock Market” is a term that is used to refer both to the physical location for buying and selling stocks, and to the overall activity of the market within a certain country. When you hear “The stock market was down today,” it refers to the combined activity of many stock exchanges.
The major exchanges in the US are the New York Stock Exchange (NYSE), the American Stock Exchange (Amex), and NASDAQ.
The correct term for the physical location for trading stocks is the “Stock Exchange.” A country may have many different stock exchanges. Usually a particular company’s stocks are traded on only 1 exchange, although large corporations may be listed in several.
Investing Around The World
There are stock exchanges located throughout the world, and it is possible to buy or sell stocks on any of them. The only restriction is the oparating hours of each exchange. Both the NYSE and NASDAQ, for example, operate from 9:30 am to 4:00 pm Eastern Time, Monday through Friday.
Other exchanges have similar opening hours based on their local time. When you trade on the Hong Kong Stock Exchange, your order will be executed sometime between 9:30 pm and 4:00 am New York time.
The locations of the major stock exchanges of the world are:
Japan (Tokyo Stock Exchange)
India (Bombay Stock Exchange)
Europe (London Stock Exchange, Frankfurt Stock Exchange, SWX Swiss Exchange)
the People’s Republic of China (Shanghai Stock Exchange)
Stock Market Fluctuations
The economic health of a country will strongly influence its stock market. When the economy is doing well the market is bullish. Bull markets occur during times of high economic production, low unemployment and low inflation. Bear markets, on the other hand, follow downturns in the economy. When inflation and unemployment are rising, stock prices are usually falling.
Stock price fluctuations are also driven by supply and demand, which in turn are dependent to a great degree on investor psychology. Seeing a stock price rise rapidly can cause investors to jump on the bandwagon, and this rush to buy drives the price up even faster. A falling price can have a similar effect in the other direction. These are short-term fluctuations. Stock prices tend to normalize after such runs.
The stock exchange is only 1 of many opportunities for people to invest. Other popular markets include the Foreign Exchange Market (FOREX), the Futures Market, and the Options Market.
FOREX: World’s Largest Market
The FOREX is the biggest (in terms of value) investment market in the world. FOREX traders buy 1 currency against another and can profit from small changes in currency value. Most FOREX trades are entered and exited in 1 24-hour span, and traders have to keep a close watch on the market in order to make profitable trades.
The Futures Market
The Futures Market is a market of contracts to buy and sell certain goods at specified prices and times. It exists because buyers and sellers of goods wish to lock in prices for future delivery, but market conditions can make the actual futures contract fluctuate considerably in value.
Most investors in the futures market are not interested in the actual goods — only in the profit that can be realized from trading the contracts.
The Options Market
The Options Market is similar to the Futures Market in that an option is a contract that gives you the right (but not the obligation) to trade a stock at a certain price before a specified date. These options can be traded on their own or purchased as a form of insurance against price fluctuations within a certain time frame.
Stocks: Low Risk, Long-Term
All 3 of these markets are considered quite risky without considerable knowledge and experience. They also require close monitoring of market movements. Stocks, on the other hand, are less risky because movements of the market are usually more gradual. Although short-term investment strategies are possible, most people view stocks as long-term investments.