When we teach the stock market for dummies course, we try to get everyone to understand that when they buy and sell stocks they are joining in an auction with thousands of other traders. And unlike most auctions that sell antiques, livestock, or farm equipment, the stock market sells fractional ownership in public companies.
More than 9000 companies are listed on the two major U.S. exchanges: the New York Stock Exchange (NYSE) and the National Association of Securities Dealers Automated Quotations (NASDAQ). We also teach the stock market for dummies class that the oldest exchange is the NYSE. The NYSE was founded more than 200 years ago by 24 brokers that signed the Buttonwood Agreement. The NASDAQ is a youngster compared to the NYSE. It began in the early 1970’s and was the world’s first electronic exchange. We make a point to emphasize this in our stock market for dummies class.
The essence of the stock market for dummies is seen on the NYSE floor. The action is a continuous interaction between buyers and sellers and is called the open outcry. Bid and offer prices are verbally announced to traders. Traders signal their willingness to buy or sell and the quantity they want by shouting their response. This back and forth negotiation is the pushing and pulling between buyers and sellers that moves the price of the stock.
It wasn’t that long ago that the only way to buy and sell stock was to call or visit a stockbroker. With computers now in nearly every home, the relationship between broker and client has changed forever. Most of the major brokerages supply software allowing their customers to trade from their home computers. This has opened a world of possibilities for the small investor. For a stock market dummy, this means the ability to place buy and sell orders without a broker, using your own ideas, and at a time of your choosing. We drill this into the heads of all students who take our stock market for dummies class
The cost of doing business has been drastically reduced. Commissions for buys and sells have been greatly discounted and are a source of competition and a means to attract customers among the big brokerages. Long gone are the days of a full-service broker gaining a 5% commission on a stock transaction.
With this new freedom and independence comes responsibility. To be successful, stock trading dummies must have a method for finding good stocks to buy and learn the best time to buy them. We teach this in our stock market for dummies class.
The internet has made stock market information easy to obtain. There area a variety of sites offering a world of data about publicly traded companies. There are likely as many bad sources of information as good ones. Caveat Emptor!
The freedom to make independent trading choices with the hopes of financial freedom is a great attraction to many. And it is possible to make a living, enhance your income, or protect your assets by investing your own money.
Set financial goals, create a plan to achieve those goals, and make sure the plan is sound and achievable. Start small and go slowly. Treat the endeavor like a business. Success will come to all stock market dummies that exercise patience, are diligent workers, and realize that the learning never stops, especially for those that have taken the stock market for dummies course.