Explain the Method of Trading in Stock Exchanges

A stock exchange is a corporation or organization that provides trading facilities for stockbrokers and traders. Instruments traded on stock exchanges include stocks, investment trusts, commodities, options, mutual funds, unit trusts and bonds. Only members can trade on an exchange.

Specialists

A stock specialist is a member of a stock exchange who provides several services. They make a market in stocks by providing the best bid and best ask during trading hours. Specialists also maintain a fair and orderly market.

Floor Brokers

Floor brokers trade on the floor on the major exchanges. Floor brokers buy and sell securities in their own account. Floor brokers are required to take and pass written tests in order to trade. They must abide by exchange rules, and they must be a member of the exchange on which they trade.

Stockbrokers/Financial Advisers

Stockbrokers, financial advisers, certified financial planners and registered representatives buy and sell stocks on behalf of their clients and customers. They must pass certain written exams in order to carry out trades and adhere to ethical standards.

Day Traders

Day traders are individuals who buy and sell securities for their own accounts. Day traders will trade quickly--making purchases and sales on the same day.

Casual Traders

A casual trader is a person who tries to build up a portfolio by buying and selling securities for his own account over a period of time. Technology has simplified the process and given the casual trader much of the same information and tools available to professional traders.

Online Trading

Online trading is available to any person that has an account at an online trading firm. A person can enter trades from a personal computer and set price limits and targets. Commissions are often much less than at a full-service brokerage firm.

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