In order to understand how stocks trade, which should be familiar with the concept of a stock exchange. The purpose of a stock market is to link buyers and sellers. In short, a stock exchange is a place where people can buy and sell shares. These fall into two categories, physical and virtual exchanges, exchange indicate the names of their types and the difference between them.
A physical change is a place where trade in the stock takes place in a flat open trading system by the outcry. You should have seen the pictures of a physical exchange on television, or in film that shows people wildly throwing up his arm, speaking by telephone, or gesturing wildly waving at each other. The best example of a physical exchange is the New York Stock Exchange (NSYE). Brokerage Firms that are members of the exchange, orders for these stocks and then passed to the floor brokers who are present at the trading post on the floor. The work of these agents is word to match buyers and sellers. Stock prices are determined by auction, the highest price at which a person is willing to buy and the lowest price at which the other is ready to sell. Once the transaction is completed, the floor brokers to send data to the brokerage firm they represent.
In the virtual marketplace, the exchange of values between buyers and sellers is conducted in an electronic medium, the Internet and a network of computers. The most popular example of a virtual exchange, also known as OTC market (OTC) is the NASDAQ. Since there is no central location, the trade is conducted through a telecommunications network of dealers. The NASDQ and other OTC market, do not meet the listing requirements of any of the regulated markets. The operations are conducted through brokers, who are the market makers. They continually bid and ask prices within a certain percentage of shares which are designated to trade in. In this process, which can match buyers and sellers, or maintain an inventory of shares to investors.
To stock in trade, you must also be able to differentiate between the primary market and secondary market. In the primary market, companies create new issues of shares through IPOs. In other words, while it is understood largest market for the purchase of new values directly from the issuer, the secondary market is where investors can buy and sell pre-issued shares directly without any involvement of the issuing company. So, when we talk of a stock market, which was actually referring to a secondary market.