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Stock Trading Basics
Introduction to Buying & Trading Stocks

In the jargon of financial markets, trading a stock is interchangeable with buying or selling a stock. The two terms mean the same thing. People do not trade one stock for another in the traditional sense; they are purchased and sold. Buying and selling stocks can be a complicated business, but the basics are fairly easy to understand.

Exchange Floor Buying & Trading

The New York Stock Exchange (NYSE) is a good example of an exchange floor. When a person orders a certain number of stocks, a floor clerk is sent down to the exchange floor. This clerk then finds a floor trader who tracks down a person willing to part with the specified number of stocks. The
two people find a price they agree on, then notify the buyer. Within a couple of days, the transaction is officially complete.

Buying & Trading Stocks Electronically

Due to advances in technology, it seems likely that floor trading exchanges like the New York Stock Exchange won’t be around forever. In fact, the NASDAQ is completely electronic. In the electronic market,
computer networks act in the place of human brokers, bringing buyers and sellers together. Trades are confirmed within seconds, rather than being subject to the rather long, cumbersome waits inherent to floor trading.

As with floor trading, however, people still need a broker to handle electronic trading transactions. This person will access the electronic market and perform the necessary functions to find buyers or sellers of
any given stock. The process is much more streamlined and efficient than floor trading.