Stocks & Shares - Preferred Stock

Type Of Securities  - Preferred Stock

Preferred stock is similar to the common stock, usually without voting rights, who offers a limited risk but limited profit to the shareholder. It represents some degree of ownership in a company but typically doesn't come with the same voting rights. With preferred stock investors are usually guaranteed a fixed dividend forever. This is different than common stock, which has variable dividends that are affected by the market and never guaranteed. 

Due to this nature of the preferred stock, some people consider preferred stock to be more like debt than equity. When you buy a preferred stock, you know in advance what is the amount of the dividend you will get, and the company pay dividend to you before thay pay to the common shareholders. On the other hand, the amount of dividend you get is the same even if the company had much larger profit that year. 

Another benefit of investing into preferred stock is that in the event of liquidation preferred shareholders are paid off before the common shareholder. This means that when the company must liquidates and pays all the creditors, common stockholders will not receive any money until after the preferred shareholders are paid out. 

Preferred stock may also be callable, meaning that the company has the option to buy back the shares from shareholders at anytime for any reason. Investing into this type of stock gives investor a greater claim to a company's assets and earnings. 

Also, prices of preferred stocks tend to have lower volatility od common stocks and that means a lower overall risk.

Stocks & Shares - Common Stock

Type Of Securities - Common Stock

 

Common stock, as the name imply, is a simple stock that has been issued by the corporation and is publicly traded. It is a form of corporate equity ownership and it is a type of security. It is called "common" to distinguish it from preferred stock. Stock represents a claim on the company's assets and earnings. The more stock you are holding, the greater is your ownership stake in the company. 

People that buy them can expect two types of profit. One is capital appreciation, which represent a profit that is made if you sell a stock at a higher price than you had bought. The other form of profit is trough dividends. Dividend represent a part of the companies profit, that management choosed to pay to the shareholders. They do not have the obligation to do that even if the company made a profit that year!

The general threats for to shareholders investment is that a company can go bust or bankrupt, and in that case investor can loose all o his investments. If the company goes bankrupt, the common stockholders will not receive their money until the creditors and preferred shareholders have received their respective share of the leftover assets. This makes common stock riskier than debt or preferred shares. The upside to common shares is that they usually outperform bonds and preferred shares in the long run.

Study of investing and stock market has revealed that in the long term, common stock, by means of capital growth, yields higher returns than almost every other investment. This higher return comes at a cost, because common stock carries the greatest risk. In case the company goes bankrupt and liquidates, the investor holding common stock shares will not receive money until the creditors, bondholders, and preferred shareholders are paid. When people and me in this blog, talks about stocks, they mean on common stocks.

Stocks & Shares As A Form Of Business Ownership

For a people with cash, there are many investment vehicles to choose from to achieve their financial goals. These are: stocks, bills, bonds, mutual funds, hedge funds, futures, options, swaps, forwards, warrants, CFDs, spread-betting etc. In this post I’ll start with most common of all above – Stocks.

Stock (Shares) - Forms Of Business Ownership

A stock or a share represents abstract part of the business ownership. There are four main types of business entities. These are Sole proprietorship, Partnership, Limited liability companies and Corporations. Sole proprietorship and partnership are two simple form to start a business, but the problem with them is that the owner(s) is liable with his all net worth. Somewhere in between are LLC. Or limited liability companies, where the ownership is liable up to the stake of his capital in the entity.

Last one, a Corporation, is a is a legal entity where whole business is „divided“ in shares or slices. That slice or share represents a part of the company, and can be traded between people. Because corporations have limited liability, which is limited to the stake of the ownership or to the number of shares of stock that you have in possession, it’s clear that the individual investor got a chance to invest in the business with lower risk, then if himself started a sole proprietorship or partnership.

The company can be publicly traded, if it choose to be listed on a stock exchange. To be listed, it has to meet certain requirements of a stock exchange and bank that acts as a underwriter of the emission, and finally trough an IPO or Initial Public Offering, stock get listed on the secondary market ie. a stock exchange.

SOUTH Trading System Performance (January 2011): +32.23%

SOUTH – Short Only

Direction: Short Only

Leverage Used: 2:1

Max Drawdown: -3.47%

Starting Capital: $10,000

Ending Capital: $13,223

Net Profit (Month January): $3,223

Net Profit % (Month January): 32.23% 

Net Profit (Since Inception): $3,223

Net Profit % (Since Inception): 32.23% 

January was an excellent month posting an overall gain of 32.23%! From the first trading day, system started to make money, with only two negative day during entire month! As a result, drawdown was only -3.47%.

At the end of January, South trading system made 32.23% before commissions, and that is also a compounded gain. This month’s drawdown was only -3.47%, which is very low considering that we made more then thirty percent profit.

Largest daily loss during the month was -3.47%, and the next day came largerst gain – a profit of 9.08%. At the end of this month, since inception South trading system made $3,223 and finished a month with a balance of $13,223.

To see other trading systems offered click here. If You would like to subscribe to this system and start reciving daily Trade Alerts,  click on the link below and fill out the form:

Requirements For Listing On The London Stock Exchange:

Becoming listed on the LSE is a complicated process. The London Stock Exchange listing rules that must be fulfilled before a company can 'go public' follow.

The process of floating a company and their ongoing regulation is controlled by the UKLA (UK Listing Authority) which is a part of the FSA. The UKLA's listing requirements include:

- Directors must sign a listing agreement which commits the board to high standards of behaviour and reporting levels to shareholders.

• The directors must prepare a prospectus (known as listing particulars) to potential investors.

• At least 25% of the share capital must be in the hands of the public so that the shares can be actively traded and remain reasonably liquid.

• The company should have at least three years of accounts.

• The company needs a sponsor (bank, stockbroker or other professional adviser) to guide and advise and to reassure the UKLA that the company is of sufficient quality.

Once listed on the London Stock Exchange, the company and directors have continuing obligations, which include: 

• Giving the market any price sensitive information as quickly as possible.

• To undertake to disclose information fully and accurately.

• The directors must follow strict guidelines relating to the buying and selling of their own shares in the company.

These are just a few main rules and they show you what is required of companies hoping to list on the main market.

One of the attractions of the Alternative Investment Market, AIM, is that these requirements are significantly less onerous and therefore costly. This helps to attract younger and more rapidy growing companies to market.

NORTH Trading System Performance (January 2011): +20.34%

NORTH – Long Only

Direction: Long Only

Leverage Used: 2:1

Max Drawdown: -1.25%

Starting Capital: $10,000

Ending Capital: $12,034

Net Profit (Month January): $2,034

Net Profit % (Month January): 20.34% 

Net Profit (Since Inception): $2,034

Net Profit % (Since Inception): 20.34% 

Excellent start of the year! System finished the month with a double digit profits, with a very small drawdown of -1.25%. Based on backtesting results we’ve done, average monthly profit is from 5% to 8%, so this result is very unusuall and we have to be very cautios next few months as results tend to reverse to their average values.

At the end of a January, system made 20.34% before commissions and made a compounded profits of 20.34% since January 2011. Drawdown in January was -1.25%, and that is also maximum historical drawdown. Largest daily loss was -1.25% and largest daily gain was 3.19%. 

At the end of January 2011 this system made $2,034 and finished a month with a balance of $12,034.

To see other trading systems offered click here. If You would like to subscribe to this system and start reciving daily Trade Alerts,  click on the link below and fill out the form:

EAST Trading System Performance (January 2011): +23.57%

EAST – Short Only

Direction: Short Only

Leverage Used: 2:1

Max Drawdawn: -2.04%

Starting Capital: $10,000

Ending Capital: $12,357

Net Profit (January 2011): 2,357

Net Profit % (January 2011): 23.57%

Net Profit (Since Inception): 2,357

Net Profit % (Since Inception): 23.57% 

This is one of the systems we developed in recent years. It is short only system which trades highly liquid stocks and ETFs. During backtesting and forward testing it showed very good results in bull and bear market. All results here are simulated results and do not include commission costs (which can vary) and possibility that some stocks are hard to borrow sometimes. It use 2:1 leverage. All position are held overnight.

In January 2011, we started with a $10,000 of capital, which is in our opinion enough to sustain some drawdowns if they happen in the beginning of the trading. 

In January 2011 system made a profit of 23.57% with a drawdown of only -2.04%.

At the end of January 2011 this system made $2,357 and finished a month with a balance of $12,357. 

To see other trading systems offered click here. If You would like to subscribe to this system and start reciving daily Trade Alerts,  click on the link below and fill out the form:

How The LSE Information System Works And What Are The Two Main Groups Of Stocks

The London stock exchange is actually divided into two parts. The first part is the main market, for which companies need at least three years of audited accounts to become members. The second part of the exchange is the Alternative Investment Market, otherwise known as AIM.

AIM offers a market for those shares that either cannot obtain or do not want a full listing on the main market (also known as the Stock Exchange's Official List). AIM is targetted at smaller companies with fewer costs and formalities in obtaining a listing. This often attracts younger and fast growing companies.

The Alternative Investment Market started on the London Stock Exchange in June 1995 and at the end of 1996 it replaced the Unlisted Securities Market.

In the early days, AIM was viewed as a 'high tech' home for UK stocks, rather like the NASDAQ in America. However, this was in part due to the massive rise in technology stocks (TMT) in the late 1990s that became the 'Internet bubble'. 

AIM now hosts a wide range of small companies in almost every imaginable area - including a number of companies that are not even UK companies but wanted a UK listing.

It goes without saying that in many of the companies listed on AIM, liquidity is lower than might be the case elsewhere on the LSE. This is in large part due to the smaller relative size of AIM companies, but also because not all stockbrokers deal in AIM stocks.

How The London Stock Exchange Information System Works?

The London Stock Exchange is the oldest major financial market in the world but it is now no longer the largest. In March 2005 there were over 2500 companies quoted on the London Stock Exchange market including over 300 from outside the UK.

To be granted permission to be listed on the stock exchange companies must satisfy certain conditions and then others on an ongoing basis. One of the conditions is that companies must have a trading record of at least three years before they can obtain a listing. 

There are currently two different trading systems:

SEAQ is the Stock Exchange Automated Quotation System and is a quote-driven system. Market makers compete, transacting amongst themselves and dealing with the public through brokers (also known as dealers). Trading is done by phone.
 

SETS is the Stock Exchange Electronic Trading Service and is an order-driven system. It allows brokers to post orders and trade automatically through an electronic order book. This eliminated the market makers role. SETS is limited to FTSE 100 stocks and some FTSE 250 shares. 

London Stock Exchange Information System - SEAQ:

SEAQ stands for Stock Exchange Automated Quotation System.

Now there are more then 1500 listed companies whose bid and offer prices are quoted on SEAQ. SEAQ is essentially a price-information service and not a trading system. It can be accessed through a number of screen based information services. Trades are therefore carried out either by phone or online. SEAQ provides:

- prices quoted by market makers

- the number of trades reported (above £1,000 in value)

- the best bid/offer prices with upto three market makers prepared to deal

- an automatic trade execution service

If you need more informations please go to SEAQ 

London Stock Exchange Information System - SETS:

The basis of SETS was launched by the London Stock Exchange in 1997. It was designed to cater for FTSE 100 firms and the largest of the FTSE 250 companies. Since then the system has (as ever) undergone significant change. The main points of the SETS system are:

- London Stock Exchange SETS deals go through brokers. 

- The brokers enter buy and sell orders through an electronic order book. 

- Market makers have no role in the transaction - thus removing an added layer of costs.

There is no minimum order size. This is very useful to the private investor. The arrival of PEPs and ISAs (both tax advantaged investment plans which effectively hold shares in a nominee type account) meant that many private investors might own a portfolio of shares but never receive annual company accounts. SETS makes it easier to purchase small holdings (many investors now own a number of shares in their tax wrapper and just one share in their own name to ensure that corporate documentation arrives). 

Orders may be matched against more than one opposite trade in the order book. The Stock Exchange Electronic Trading System operates on a T+3 basis which means that the financial aspects must be completed on the third working day after the trade.

London Stock Exchange SETS orders are either:

- At best which means the trade is carried out at the best possible overall prices

- Execute and eliminate is also known as immediate execution. Any amount of an order that can be completed at a set price is done - everything else is discarded.

- Fill or kill involves the trade being done at exactly the terms specified in the correct volume - or nothing is done at all.

- Limit orders remain on the SETS screen. They are set for prices that are 'no worse than' and may be filled slowly over time. An expiry date (max of 90 days) prevents these orders running for too long.

If you need more informations please go to SETS

Now let's go and see what requirements a company has to meet, before it can be listed on the London Stock Exchange!

History Of The London Stock Exchange:

The London Stock Exchange, or LSE, is one of the world's oldest stock exchanges, with a rich history dating back to 1698. The exchange began its life in the coffee houses of 17th century London, when John Castaing began issuing "at this Office in Jonathan's Coffee-house" a list of stock and commodity prices called "The Course of the Exchange and other things."

The London Stock Exchange history is proof that from something small, a huge giant can be built. It can trace its history back more than 300 years. Starting life in the coffee houses of 17th century London, the Exchange quickly grew to become the City’s most important financial institution.


Important Years In History Of The London Stock Exchange:

1698 - John Castaing begins to issue 'at this Office in Jonathan’s Coffee-house' a list of stock and commodity prices called 'The Course of the Exchange and other things'. It is the earliest evidence of organised trading in marketable securities in London.

1698 - Stock dealers are expelled from the Royal Exchange for rowdiness and start to operate in the streets and coffee houses nearby, in particular in Jonathan’s Coffee House in Change Alley.

1720 - The wave of speculative fever known as the South Sea Bubble bursts. Details of this can be found in many investment books - especially those related to investor or crowd psychology. It makes for an instructive and entertaining read!! Without doubt, this has to be one of the most interesting times in London Stock Exchange history.

1761 - A group of 150 stock brokers and jobbers form a club at Jonathan's to buy and sell shares.

1773 - The brokers erect their own building in Sweeting’s Alley, with a dealing room on the ground floor and a coffee room above. The members soon name it the 'The Stock Exchange'.

1801 - On 3 March, the business reopens under a formal membership basis. On this date, the first regulated exchange comes into existence in London, and the modern Stock Exchange is born.

1812 - The first codified rule book is created.

1836 - The first regional exchanges open in Manchester and Liverpool.

1854 - The Stock Exchange is rebuilt.

1876 - A new Deed of Settlement for the Stock Exchange comes into force.

1914 - The Great War means the Exchange market is closed from the end of July until the new year.

1923 - The Exchange receives its own Coat of Arms, with the motto 'Dictum Meum Pactum' (My Word is My Bond). For many decades, this phrase summed up the code of those working on or in the exchange. 

1939 - The start of World War Two. The Exchange is closed for 6 days and reopens on 7 September. The floor of the House closes for only one more day, in 1945 due to damage from a V2 rocket – trading then continues in the basement.


London Stock Exchange In Modern History:

1972 - Her Majesty the Queen opens the Exchange's new 26-storey office block.

1973 - First female members admitted to the market.

1986 - Deregulation of the market, known as 'Big Bang': Ownership of member firms by an outside corporation is allowed. All firms become broker/dealers able to operate in a dual capacity. Minimum scales of commission are abolished. Individual members cease to have voting rights. Trading moves from being conducted face-to-face on a market floor to being performed via computer and telephone from separate dealing rooms. The Exchange becomes a private limited company under the Companies Act 1985.

1991 - The governing Council of the Exchange is replaced with a Board of Directors drawn from the Exchange's executive, customer and user base. The trading name becomes '“The London Stock Exchange'.

1995 - AIM is launched – read about it on other pages of this site.

1997 - SETS (Stock Exchange Electronic Trading Service) is launched to bring greater speed and efficiency to the market. The CREST settlement service is launched.

2000 - Shareholders vote to become a public limited company: London Stock Exchange plc.

2001 - London Stock Exchange plc lists on it's own Main Market in July.

Now let's go and see how trading is done on the London Stock Exchange!

What Is The London Stock Exchange (LSE), Better Known As The "City Of London"?

The London Stock Exchange, or LSE, is one of the world's oldest stock exchanges, with a rich history dating back to 1698. The exchange began its life in the coffee houses of 17th century London, when John Castaing began issuing "at this Office in Jonathan's Coffee-house" a list of stock and commodity prices called "The Course of the Exchange and other things." As it is organized today, the LSE has 4 main business areas that are offered to the public investors:

- Equity Markets - enabling companies from around the world to raise capital needed to grow, and by listing securities in a well regulated market. Access to these markets is provided through the Main Market and AIM. 

- Trading Services - providing a fast and efficient trading platform, to be used by brokers and firms around the world to buy and sell securities.
 
- Market Information Services - supplying high quality, real-time information and news to the financial community.
 
- Derivatives - expanding to become the world's most efficient and liquid market for equity derivatives. The EDX London hopes to move the LSE beyond their core equities markets. 

Other Important Facts About The London Stock Exchange:

The following are some of the facts and figures available for the London Stock Exchange. These statistics will allow you to understand the relative size of the exchange:

- There are more than 380 firms worldwide that trade as members of the London Stock Exchange.
 
- The exchange claims to be the most international of all stock exchanges, with companies from over 84 countries admitted to trading in their markets.
 
- The exchange is arguably the largest stock exchange in Europe.
 
- The LSE accounts for 63% of all European initial public offerings.
 
- In November 2010, there were around 12 million trades, involving 102 billion British Pounds.
 
- Around 2700 companies were listed on the London Stock Exchange at 2010. with a total market value of 3.8 trillion British Pounds. 

Let's go now to the history of the London Stock Exchange!

Seats On The New York Stock Exchange

What Is The Seat On The New York Stock Exchange?

A seat on the New York Stock Exchange represent both an equity interest in the Exchange as well as the right to access the trading facilities of the market.

A Membership on the NYSE is traditionally referred to as a 'seat' because in the early year of its existence, Members sat in assigned chairs in the hall where the Exchange’s daily roll call of stocks was conducted.

After a post-Civil War boom in stock trading, the Exchange adopted a system of continuous trading, replacing calls of stocks at set times with simultaneous trading of all listed stocks on a large open trading floor.

The term 'seat' lost its literal meaning with the advent of continuous trading in 1871. Trading was then conducted at trading posts on a large open floor. The seats that the brokers had occupied were gone. Owning or leasing a seat on the Exchange enabled qualified and licensed professionals to buy and sell securities on the floor.

In 1868 the Exchange established a fixed number of Memberships and revised its rules to allow Members to sell their seats. After selling for as little as $4,000 in the late 1860s and early 1870s, Memberships reached $80,000 by the turn of the century, reaching a high of $625,000 during the bull market of 1929 before reaching new highs of over $1 million during the 1980s stock market boom.

In 1990, a seat sold for $250,000. The highest price ever paid for a seat was $4 million on Dec. 1, 2005, followed by several seat sales at the same price.

Since the late 1970s, NYSE Members have been permitted to lease seats and their assigned trading rights to qualified individuals. 

New York Stock Exchange In Modern Times:

At the close of the market on December 30, 2005, member seat sales on the New York Stock Exchange officially ended, in anticipation of the NYSE’s plans to become a publicly traded company by way of merger with Archipelago Holdings Inc.

In 2005, NYSE seat prices have reached an historic high, quadrupling from a low of $975,000 on Jan. 11 to reach a new all-time high of $4 million in early December.That is an increase of 310%! The most recent seat sale, on Dec. 29, was for $3,505,000.

On Wednesday, Jan. 4, 2006, the NYSE conducted a Dutch auction for trading licenses. This gave Members and Member organizations the right to access the trading facilities of the NYSE market.

Until 2006, members could only join by purchasing existing seats, which were limited to a total of 1,366. In April 2006, the NYSE went both electronic and public, by merging with the already publicly traded Archipelago electronic stock exchange. The new merged company is called the NYSE Group, Inc., and the seats of the NYSE translated into shares of stock. 

Now let's go to the London Stock Exchange or LSE, better know as the City of London!

History Of The New York Stock Exchange: 1792-2011

As you can see, the New York Stock Exchange was formed in 1792! To put things in the perspective, while in Europe were Napoleonic wars, in New York city a group of 24 out of 64 traders made an agreement on 17th May 1792 and formed New York Stock & Exchange Board. The agreement was signed under a buttonwood tree. In 1863 the name of the exchange was shortened to "New York Stock Exchange" - the name it still holds today.

As the 20th century dawned, the NYSE was firmly established as one of America’s preeminent financial institutions. Trading in listed stocks had tripled between 1896 and 1899 and would nearly double again by 1901.

More space was clearly needed, the market was expanding. So the Exchange invited eight of New York City’s leading architects to join in a competition to design a grand new building.

The Exchange chose the neoclassic design of architect George B. Post. Today, the Exchange building is considered one of Post’s masterpieces and is a New York City and American national landmark.

Of course, one of the most important events in the New York Stock Exchange history happened in 1929 when the 'Great Depression' and stock market crash occurred. It is a subject about which I have done quite a lot of reading and find fascinating.

 

The Great Depression And The New York Stock Exchange:

Stock prices fell sharply on October 24 1929, Black Thursday, with record volume of nearly 13 million shares. Five days later, the market crashes on volume of over 16 million shares which is a level not to be surpassed for 39 years. On September 3 1929, the Dow Jones Industrial Average reaches its 1929 peak of 381.17.

On October 29, Black Tuesday, prices fall sharply and the stock market crashes. This crash produces a record volume of nearly 16 million shares. The Dow Jones Industrial Average falls more than 11 percent.

Other important facts about members and member firms throughout NYSE history:
-Highest price paid for a membership: $4,000,000 on December 01, 2005
-Lowest price paid for a membership: $2,750 in 1871
-First member firm to incorporate: Woodcock, Hess & Co., Inc., 1953
-First member firm to go public: Donaldson, Lufkin & Jenrette, 1970
-First member firm to be listed on the NYSE: Merrill Lynch, 1971

Until 2006, members could only join by purchasing existing seats, which were limited to a total of 1,366. In April 2006, the NYSE went both electronic and public, by merging with the already publicly traded Archipelago electronic stock exchange. The new merged company is called the NYSE Group, Inc., and the seats of the NYSE translated into shares of stock.

Now let's go and see how the NYSE seat system worked in the Seats On The New York Stock Exchange.

What Is The New York Stock Exchange (NYSE), Better Known As "Wall Street"?

The New York Stock Exchange or NYSE is a physical exchange, located at Wall Street, also knows as referred as a listed exchange – where only stocks that can be traded are one that are listed on the exchange.

NYSE is the world's largest equity market. On an average trading day there are 1.46 billion shares traded that worth around 46 billion US dollars.

NYSE listed companies are one of the world’s biggest and best. They range from 'blue-chip' companies that have been trading for decades, to young high-growth ones. At the time of the writing there are around 2800 listed companies.

The NYSE has a status called 'members'. A member firm is a company or individual who owns or leases a "seat". Only these member firms are allowed to buy and sell securities on the trading floor. The member firms must must meet rigorous professional standards set by the Exchange.

The number of seats is 1366 since 1953. Since 1868 it has been possible for members to sell or lease their seats after a change in the rules of the exchange.

Customers orders are sent by brokers to the floor brokers, who are members of the exchange. Then, floor brokers send the order to the specialist’s trading post where order is finally get executed.

Specialist who is also known as a market maker, as the name imply, specialize in one security only and his job is to make a market for it. So the specialist's job is to match buy and sell orders using open outcry. If there is a spread between bid and offered price and the trade can’t be executed in that moment, the specialist comes in with his own money or stock to close the difference. In other words – to make the market.

When trade is executed, details are reported on the tape and sent back to the brokerage house, who then notifies the customer that his trade was executed and at what price. That's the report that You and I get when we buy or sell a stock.

Now let's go to the history of New York Stock Exhange in the History Of The New York Stock Exchange.

What Is A Stock Market Or A Stock Exchange

A stock or equity market is first of all a place where buyers meet sellers to exchange their goods, in this case - stocks, also known as securities for the money. In modern times, those places where trading is done and where securities are listed are actually a companies, just like the ones that are traded on the exchanges. The whole world stock market was estimated to be around 36 trillion US dollars based on the data from 2008.

The stock market or stock exchange, as we said, is a place where stocks are listed and traded. In former days, those stocks were just a pieces of paper that represented a part of the ownership in company. Today, those pieces of paper, also known as stock certificates, are in electronic form and can be issued in paper form only on the request.

The largest stock exchange in the world, by market capitalization based by stocks listed on them, is New York Stock Exchange better known as NYSE. Other exchanges in the United States are American Stock Exchange or AMEX and NASDAQ. 

Other important stock exchanges are in England where is the London Stock Exchange is located. In Asia we have Tokyo Stock Exchange, in Canada there is the Toronto Stock Exchange, in Paris the Paris Bourse, in Germany the Deutsche Borse (former Frankfurt Stock Exchange).


Importance Of Stock Exchanges: 

The stock market is one of the most important ways for companies to raise money to expand and grow their businesses. This allows businesses to be publicly traded and to raise additional capital for expansion by selling shares to the general public. Liquidity that exchanges provide give an investors a possibility to quickly buy and sell securities and with less risk. 

It’s wide known that if the stock market is on the rise it is considered that economy is up and booming. That’s the reason why is it considered stocks market to be a leading indicator of a country's economic strength and development.

Rising share prices, tend to be associated with increased business investment and vice versa. Share prices also affect the wealth of households and their consumption. For that reason, Central banks, which I’al cover in the future posts, keep an eye to the stock market prices and if prices rise to much as in ’90s, it can lead to the stock market crash.

Stock exchanges are also the clearinghouses for each transaction, which means that they collect and deliver the shares and guarantee payment to the seller of a security. This eliminates the risk to an individual buyer or seller that the counterparty cannot make the payment.
 

Let's go now to the New York Stock Exchange Or NYSE...

Welcome To My Stock Market & Forex Blog!

Who Am I And What Is This Blog About?

Hi, my name is Dusan Kovacevic and welcome to my blog! I became interested in the markets since 2004, and since then I'we been trading in stocks, forex, CFDs and spread-betting. Also, I have a BA degree in Finance and worked as a junior broker, so I think I have  a solid understanding about financial markets. My intention with this blog is to help people with little or no formal education about financial markets to learn how global financial system works, what is the difference between investing and trading and how to use both to achieve your financial goals.

Here is a list of the main subjects, that in my opinion, are really important to understand before we can move to real trading stuff. Here is the list:

- What is stock market?

- What stock exchanges exist today and how they work?

- Macroeconomic and why is it important to understand?

- Cycles, recession and prosperity.

- Meaning of inflation and deflation.

- What are interest rates

- What is yield curve

- Feds and Fed's chairmen

- Indexes and averages and what are they telling me?

- Types of trading instruments

- Type of stocks

- Bonds, what are they and are they really alternative to stocks?

- Derivatives, what they are and differences and similarities between them

- Options, calls, puts and the greeks

- Futures, forwards warrants and swaps

- Mutual funds and the differences between them

- ETFs and why are they important for investors to achieve their goals?

- Hedge funds

- Trading vs. Investing? What's better?

- Trading strategies

- Investing strategies

- News. Are they important or not, and how to know when are news already priced into the price of   underlying instrument.

- Fundamental and technical analysis.

So let's start with definition of what the is a Stock Market...