The Interesting History Of The Stock Market

http://youtu.be/33PSaC1yaDQDifference between NYSE and NASDAQ:

Talking about the Stock Market we seem to mean a different dimension, not a physical location.However, the Stock Market does have physical locations.

Wall Street, also known as the Dow, or the NYSE, is located in New York

Wall Street is the Address(or is it?)

Many people think of Wall Street and the Stock Market as one in the same, and indeed, it used to be that way.

Dutch settlers initially built a stockade here in 1653 for defense purposes.In 1685 the stockade was torn down and a street was built called Wall Street.In 1790 the first Stock Exchange was founded in Philadelphia which became the model for the New York Stock Exchange.

In 1817 the NYSE was officially opened.The NYSE was moderately successful till the early 1900's when the market entered a boom period which lasted more or less until 1929.

This boom period of course could not last forever, things were so out of kilter that people were mortgaging their homes and leveraging themselves to the limit to buy shares.The boom period crashed in 1929 and caused the Great Depression.

The 1929 Crash was caused in part by the fact that the Stock Market was virtually unregulated, which it remained even until after the market crash of 1987 which saw the Dow suffer what was the largest losing day in the Market's history.

Black Tuesday - October 29th, 1929

On Black Tuesday, a record of 16.4 million shares were traded and the ticker tape fell behind two and a half hours. On Monday, the stock market suffered a record one-day loss of around 13 percent. On Black Tuesday, the market suffered a loss of about 12 percent and did not recover for 22 years.

The economy eventually recovered from its catastrophic losses but the unregulated Stock Market practices that had partially caused the crash in the 1929 still existed and caused the stock market crash of 1987, which saw the Dow Jones suffer what was the largest single-day loss in the stock market's history.

Today's Stock Market

Today's stock market consists of about 500,000 computers all networked with dealers for the NYSE or market makers for the NASDAQ. Up until recently the Dow still used human intervention but at present all trades are computerized.

The 2 most important stock market networks are the NYSE and NASDAQ.NASDAQ is a relatively new Stock Trading System that has been computerized since its inception, where market makers normally lead trades.

It used to be that more risky stocks were traded on the NASDAQ than on the NYSE, but that distinction is fading.

The difference between the NYSE and Nasdaq is in the way securities on the exchanges are transacted between buyers and sellers.

The Nasdaq is a dealer's market, wherein market participants are not buying from and selling to one another but to and from a dealer, which, in the case of the Nasdaq, is a market maker.

The NYSE is an auction market, wherein individuals are typically buying and selling to each other and there is an auction happening; the highest bidding price will be matched with the lowest asking price.

All these computers are linked to computers worldwide. These computers can be found in banks, small businesses, and large corporations.

These computers comprise the banking networks which make computerized transactions possible.

To give you an idea as to how much gets traded: in New York City Stock Market Trades amount to over $2.2 trillion dollars daily

How has the U.S. Stock Market done in Times of War?

The worst Stock Market returns were achieved during the Vietnam War.If this happened because of the uncertainty of the times is a good question. Stock Markets do not like uncertainty and will act negatively.

Returns during the Korean War however were excellent and averaged about 18% per year while 2nd world war returns averaged about 13% per year.The 1987 Stock Market Crash

The crash of 1987 was one of the most remarkable financial catastrophies of the 20th century, perhaps since the start of the financial system several centuries ago. Why it was so strange because it should not have happened and even today we cannot fully comprehend that it did happen.

Markets fell, an unbelievable 23%, and that they did so all over the world at the

same time.It only lasted one day.

There is no explanation. No definite reason for the crash has been isolated. The best that one can say is that there were too many similarities to the 1929 crash and that this became a self-fulfilling prophecy.

The US Stock Market

http://youtu.be/OkS59a3d7aQWhen buyers and sellers meet to exchange shares of a company, then they do it at the stock exchange. Stock exchanges are virtual or physical market places which offer standardized procedures for stock trading. This is of benefit for both parties, buyers and sellers, because only an efficient and liquid stock market is a secure place to trade shares.

Stock markets play an important role in today's economy. For a company it's the best place to raise much money quickly. Companies sell shares to have more money for investments. They can achieve their business goals faster. Private investors can buy shares to become a partial owner of the company with voting rights at the shareholder meeting and the right of shared profits. For an investor it's the only way to become part of a business and enjoy the chances for high profits without founding an own company. Stocks also limit the risks and liability. In the worst case, you loose the purchase price when the shares go worthless.

There are various different stock exchanges. The most important ones in the United States are the New York Stock Exchange (NYSE) and the NASDAQ. The NYSE is a physical market place while the NASDAQ is a virtual exchange. The NYSE, also known as the "Wall Street", executes the orders to buy or sell shares through so called specialists in an "open outcry" system. Each specialist is responsible for a specific company. When an order to buy or sell stocks comes in then the specialist

tries to match orders to receive an execution. Since all orders for the same stock come to the same specialist, he usually has enough shares to match the orders.

The NASDAQ works different because there is no specialist. There are several market makers per stock who are obligated to provide a current bid and ask price at all times. There are also electronic communication networks (ECN) which work 100% electronically. All orders are matched that way. Since there is no physical location of the NASDAQ like the NYSE trading floor, it's a virtual stock exchange.

Today's stock markets work very efficiently and fast. Advances in technology, especially the Internet, allowed the stock exchanges to grow rapidly the last years. Today everybody with a computer and Internet can trade stocks online with low transaction costs. Years ago stock trading was expensive and made sense only when you bought a large amount of shares. Now you can trade stocks in seconds and so inexpensively that so called day traders execute hundreds of trades per day from their home computer.

You still need a broker to get connected to the stock market. A broker is the intermediate between the investor and the stock exchange. He takes care that your orders are executed properly and timely. Discount brokers offer only order execution while full service brokers offer more services at a higher fee like research, advice and financial planning.

No matter which broker you choose, the stock market is an exciting place offering you the choice between thousands of companies. There are new opportunities every day.