Online Trading: How it Works

According to the Legend, Joseph Kennedy, before Black Thursday, sold all his stock. This was right before the beginning of the stock market crash in the year 1929. Most investors lost a lot of money, and this was one of the marking points of what is known as the Great Depression. But why did Kennedy sell? Legend says that a shoeshine man gave him the stock tip. Back in the 1920s, the powerful and the rich invested in the stock market. To Kennedy, a shoeshine guy would not be that much informed on the stock market unless something was terribly wrong.

Nowadays, many individuals who are not rich own stock. With online trading, anyone with enough capital, a good financial history, and a computer can make investments in the stock market. People do not need personal brokers or huge sums of money to invest. Lately, when average people invest, it is not a cause for alarm. Although the market is more accessible now, you have to take online trading seriously. Below is more information on online trading account types, things to look for in an online broker, how to stay protected from fraudsters and make trades.

Reviewing Stocks & Markets

A stock share is a small piece of a company. The buyers of stock, or shareholders, invest in a company’s future by owning the corporation’s shares. A share’s price is dependent on a number of factors including economic conditions, a company’s performance and the attitude of investors. IPO, or Initial Public Offering, is a company’s first time in offering its stock for sale to the public. This move is also called going public.

Once the company makes profits, the money is shared with stockholders through giving a dividend. Profits can also be saved or re-invested by improving the business or by hiring more employees. Stocks issuing dividends on a regular basis are known as income dividends. When companies re-invest profits, these stocks are known as growth stocks. Brokers buy stock and sell them via an exchange. To do this, the brokers charge a commission. Brokers are licensed individuals who trade stocks via the exchange. Brokers do this electronically, via phone or by being on a trading floor.

An exchange is a place where people buy stock and sell stock. Brokers have to match every buy order to the sell order. They also have to match each sell order to the buy order. Some exchanges are run like auctions on a trading floor. Others usually match sellers and buyers electronically. Some of the leading stock exchanges include:

The Tokyo Stock Exchange

  • The Tokyo Stock Exchange in Japan

The New York Stock Exchange

  • The New York Stock Exchange that works through auctions


  • The NASDAQ, which works electronically

When buying and selling stocks on the internet, what you are doing is getting help from an online broker. The online broker works just the way a human broker does. You will still be using real money. However, you will be the one who decides on the stocks to buy and/or sell. You will also request trades yourself. When looking for a broker to assist in trades, select a company offering these services. There are many tips to help you choose the right company, which is what we will be covering next time.