Day trading consists of the direct opening and closing of stock positions with major stock exchanges, either using a computer on the trading floor of a branch office of a day trading firm, or using one's home or business computer to access an internet broker. The keyword in this definition is direct. In day trading, a trader has direct electronic access to NASDAQ market maker or NYSE specialists.

The market makers are NASD brokers and dealers who buy or sell NASDAQ stocks for the accounts of others, engage in the securities business for their own proprietary accounts. In essence, the market makers are stock merchants. One NASDAQ stock will have many market makers who are continuously trading in that stock and thus making a market for that stock. On the other hand, one NYSE stock will have one assigned NYSE specialist. The role of the NYSE specialist is to maintain a fair and orderly market in that security. The specialist may act either as a broker and execute orders for other securities brokers or as a dealer in a principal capacity when trading for his or her wo0n account. The specialist will take on the role of a principal infrequently in order to maintain stock marketability and counter temporary imbalances in the supply and demand of that security.

The day trader does not need a stock broker. The trader is not using a telephone to call a stockbroker, and the broker is not relaying that order to the brokerage firm's order desk. The clerk is not routing that order to the market maker. Day trading firms eliminate all that. Consequently, day trading firms have eliminated time delays and most of the expenses associated with middlemen processing trade orders. The day traders are their own brokers, and their order executions are fast and affordable.

The day trader can simply key in the stock symbol on a computer that has specialized trade execution software, press the appropriate function key, and buy or sell shares of stock on a major exchange. The software used by the day trading firms for order execution is relatively user-friendly7 and provides an efficient interface between the stock exchanges and the day trader.

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It's been a wild and wooly couple of weeks on the international stock markets. But is the recent slide grinding to a halt...or just taking a breather before tumbling some more? And more importantly, what does it mean to astute penny stock investors?

Wall Street recently stumbled to its worst week of the year, and global stock markets fell dramatically on concerns about rising interest rates and slowing growth. After rising almost 9% in the first four months of the year, the Dow Jones industrial average has fallen about 6.5% from a six-year high, reached May 10, 2006.

Stocks have been ailing because penny stock investors fear the Fed could be so focused on inflation that it ignores signs of an economic slowdown, raises interest rates too high and sends the economy into a recession.

Global stock markets were sent reeling last week after golden-tongued U.S. Federal Reserve Chairman, Ben Bernanke shocked penny stock investors in saying the Fed will continue raising interest rates to keep inflation in check.

And that decision will have a direct impact on the penny stock market. Higher interest rates hurt penny stock prices because investors believe it will curb economic growth and corporate profits.

But why is inflation heating up? Higher energy costs. Traders and penny stock investors are also worried that with the hurricane season officially under way, Gulf Coast refineries and oil production sites could be damaged again this summer and fall.

And higher interest rates have the ability to affect the entire economy. Finance charges on credit cards will rise. So too will rates on mortgages and home equity loans, putting additional pressure on homebuyers and a softening housing market. Ultimately, it will cost more to borrow for expansion.

But does this signal doom-and-gloom for the penny stock market? Au contraire. While the temptation to sell everything can be overwhelming, some see this as a great opportunity. "I would not be selling. I would tend to be buying," said one New York analyst.

So how exactly is this an opportunity? It just so happens that many companies caught in the market's downward spiral are cheaper than they were a few weeks ago. And as any seasoned penny stock investor will tell you, buying a great penny stock when it's been beaten down isn't a bad way to make money over the long haul.

If you can stomach some of the volatility that is. While many blue chip investors have difficulty handling the market's unpredictability...it's par for the course.

So, "snap out of it," said another watcher. A month of dizzying selling has brought the markets into an attractive range. Is it possible the markets will fall more? Absolutely. After all, no penny stock is a sure thing. But one thing is certain: "Stocks are much cheaper now than they were two months ago."

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With the popularity of the stock market today, many people are wondering about the historic stock prices and what that signals for future investments. Here’s a brief synopsis of the general trend of the market since it’s inception, and the method you should use to invest your money in the future.

The stock market has historically averaged a 12% overall increase each year. This is obviously very good when compared to the return you’d get from putting your money in the bank or a long term savings bond.

Therefore, you can look at these historic stock prices and conclude that just throwing your money into a mutual fund is a wise long term choice. Actually, nothing could be further form the truth.

You see, there is a lot of misinformation on investing today. Since the stock market has historically averaged a 12% rate of return on investment, many people view mutual funds as good investments. This is because mutual funds spread out their holdings, and will tend to mirror the market as a whole.

Actually, this can be disaster. Many people have lost small fortunes by keeping their investments a mutual fund long term, and here’s why.

Lets’ say you’ve been investing money in a mutual fund for years and years, and it’s paid off nicely for you with a 12% return. However, you never know when the next stock market crash is going to come.

Here’s something many investors don’t know-people are required to start taking their money out of their 401K once they reach 70. With the tremendous amount of baby boomers set to retire, you combine that with the fact that the vast majority will be taking out a substantial amount of money to live on, and the stock market could very well be headed for the biggest crash in history.

We are likely still a few years off from this potential catastrophe, but it’s coming in a hurry. Therefore, if you have your money tied up in a mutual fund when this crash occurs, you can literally lose a whole lifetime’s worth of investment with one fell swoop. This has happened to many people who were told their money was secure in a mutual fund, and it can easily happen to you.

The bottom line, don’t trust others with your finances. Do your own research, become financially educated, and you will be able to spot hidden opportunities that the vast majority of others miss out on.

While the historic stock prices have generally show good rates of return, it doesn’t take much to wipe out a whole portfolio. Make sure you know what to look for when you enter the exciting world of investing.

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A recent study indicates that Americans are saving less these days than they were 10 years ago, except for entrepreneurs and corporate executive and in one particular segment – young middle-managers who are about six to 10 years into their careers and only beginning to make headway into the higher echelons of their particular industry.

Are you one of these people? If you are, then chances are that you are currently in the process of planning or expanding your base of investments. You have probably given real estate a good look and determined that, although attractive, it is more ideal for a full-time real estate investor because it demands a lot of effort and time. You also probably have a tidy little sum invested in various banking tools like savings and time deposits as well as common trust bonds and government securities. That’s all well and good and your money is safe right there. But now you want to shoot for the moon, mainly by investing in the kind of company and industry that you may be familiar with. You are eager to try the stock market.

Here are a few basics about the stock market business.

The stock market is mainly a place where you sell or trade a company’s stock. These stocks are small shares in the company which it sells to the public in order to raise capital to finance its other ventures. Of course, you already know that capital is the money that a company spends for producing, improving, expanding, distributing and promoting its products and services. If you buy a company’s stocks, you are one of its shareholders.

The use of the term stock market also applies in reference to all the stocks that are available for trading (as well as other securities) as in the statement "the stock market performed well today."

You can also trade bonds on the stock market. Bonds are a business IOU that indicate that the bond issuer holds the bond holder a debt. Bonds are traded directly between two parties over the counter.

You may opt to trade commodities on the stock market. The term commodities refers to agricultural products (coffee, sugar, wheat, maize, barley, cocoa, milk products) and other raw materials (pork bellies, oil, metals). For example, if you feel that the price of coffee will increase next month, you buy the coffee commodity now and reap the benefits of the price increase next month when you sell.

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The price/earning (P/E) ratio is another measurement that's of particular interest to investors in public businesses. The P/E ratio gives you an idea of how much you're paying in the current price for stock shares for each dollar of earning. Earnings prop up the market value of stock shares, not the book value of the stock shares that's reported in the balance sheet.

The P/E ratio is a reality check on just how high the current market price is in relation to the underlying profit that the business is earning. Extraordinarily high P/E ratios are justified only when investors think that the company's earnings per share (EPS) has a lot of upside potential in the future.

The P/E ratio is calculated dividing the current market price of the stock by the most recent trailing 12 months diluted EPS. Stock share prices bounce around day to day and are subject to big changes on short notice. The current P/E ratio should be compared with the average stock market P/E to gauge whether the business selling above or below the market average.

P/E ratios are currently running high, despite a four-year slump in the stock market. P/E ratios vary from industry to industry and from year to year. One dollar of EPS may command only a $10 market value for a mature business in a no-growth industry, while a dollar of EPS in a dynamic business in a growth industry may have a $30 market value per dollar of earnings, or net income.

To sum up, the price/earnings ratio, or P/E ratio is the current market price of a capital stock divided by its trailing 12 months' diluted earnings per share (EPS) or its basic earnings per share if the business does not report diluted EPS. A low P/E may signal an underbalued stock or a pessimistic forecast by investors. A high P/E may reveal an overvalued stock or might be based on an optimistic forecast by investors.

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The first stock exchange in late 1700's Philadelphia in United States Of America created a new way in the market of finance and economy which further led to the discovery of New York Stock Exchange (NYSE). Now with the discovery of latest technology, a turning point has come in the method of stock trade through a network of computers.

This new method has given rise to a new level of convenient and liberty to trade stock at your own comfort. Trading stock online has been becoming popular tremendously as a large percentage of population is having an access to the computers.

How To Trade Stock Online

The method of trading stock online starts by building a business relation with an online trading brokerage firm but it is always recommended that you should build up a bond with a highly reputable and renowned company. You should always gain the knowledge about the company by making researches via internet before getting into a business relation with it.

After finding an apt and appropriate brokerage firm, an online account is created in order to trade through it. This online account plays a significant role in trading stock online as it keeps on giving the updates regarding the financial portfolio so that the investor can proceed accordingly to hit the financial targets.

Benefits Of Online Stock Trading

The online trading of stock has brought a twist in the methods of trading in the market of finance and economy. There are numerous advantages of trading stock online.

1 - It has given a level of convenience to the investors as they can easily buy and sell the financial products from the comfort of their home.

2 - There are many stock trading companies that offer low charges of membership, trading, and commission because of the great competition in the finance market. There are so many companies which do not take any cent to start trading through them.

3 - It proffers the level of freedom to the investors where they can make investments in the finance market according to their interest.

4 - The online stock trading companies help in providing the information like NASDAQ quotes, real-time charts, latest news and information of the market without charging a single penny.

There is also a facility of downloading your investment's performance on regular basis to have a proper track of your investment. Also there is a facility offered by many online companies to listen to the audio and video conferences of the topmost professionals of the finance market, and to go through the latest market editorials.

5 - There are many alluring proposals, which are proffered by different online stock trading companies. For example, many companies provide minimum $25 free for just signing in, if you create an account with them and deposit certain amount then you will be given a commission free trade worth $100, and if you are maintaining specific amount in your account then there is no need to pay for IRA money market fund trades.

There is also an offer of getting 20 free days for trading online every month if you are a resident of US and are into online stock trading since last two years.

The above-mentioned points have proved to be very much beneficial to the investors to grab large amount of profits in the thrilling market of finance.

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How does a stock market crash occur can be answered fairly simply. It's down to a lack of confidence in the marketplace and this can be due to any number of factors. We need to look at those factors to discover the answer to "how does a stock market crash?"

If confidence in the market is lacking it is important to consider both why and how. Does a stock market crash just on the say so of a couple of people? Very rarely, but if those people are major investors who suddenly come out with adverse comments in the media then they could spark a crash.

Those comments may be a result of poor economic forecasts or lower than expected results for a particular sector. It really doesn't matter so much what causes the initial selling its how the more significant investors react that drives the market. Once ordinary investors see the major players leaving the stocks and shares of bigger companies they tend to get drawn into the "herd instinct". That means that even though they don't know for sure that something is wrong they believe that others know something they don't and begin to react without thinking for themselves.

For example if the institutional investors feel one sector of the market is over priced they may decide to take their profits and run. That alone could cause small investors to try to get out at the same time leaving fewer and fewer people who want to hold the stock resulting in panic setting in.

Since the introduction of computers in stock market dealing it's this blind panic reaction that can so easily spark a crash in the market. Because the computers are programmed to react to price falls of a certain percentage they will indicate to the traders that they too should sell. What happens then? Other computers and traders get signals that the market for the shares has fallen and triggers their selling and so the frenzy grows with each set of selling signals feeding the next round of price falls.

The major stock markets are so concerned about this automated selling cycle that they have measures in place to close the markets if prices fall below a certain amount within a particular time frame.

You can see that lack of confidence for either real or imagined reasons can be the answer to the question how does a stock market crash occur?

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One way of making your money grow is investing in the stock market. Stocks are how companies grow without securing bank loans. The investor buys the company stock (shares) and receives interest in the form of stock dividends. Share holders can affect the operation of a company. Each year, there is a share holders meeting and different issues are presented for the share holders to vote on. The greater the number of shares that an investor has, the greater the number of votes the stock holder can exercise.

There are several categories of stocks. Income stocks provide revenue to the stock holders in the form of dividends. Growth stocks are shares sold by companies that reinvest their profits to increase the size of the company. You can invest in stocks online, through stock market investors or directly, as in the case of Coca Cola and a number of other companies. Some companies provide their employees with stock options allowing them to purchase stocks at a given price for a particular period of time. There are also Over the Counter Stocks. These are not listed on any exchange and are sold by smaller, riskier companies that do not meet the requirements of the exchanges.

There are a number of reasons why stocks rise and fall in value. If a company is doing well, the value of a stock will increase. Conversely, if a company is not doing well, its stock prices may fall. Other factors affect the market value of shares. The price of crude oil will affect the market value. Disasters or wars will force prices downward. The introduction of new federal regulations for an industry will have an impact, depending on how the legislation affects production. Changes in company management also have an affect on stock prices.

Stock brokers buy and sell stocks on behalf of investors. They also provide information to their clients regarding the best times to buy and sell based on the market value of the stocks and whether they are rising or falling in value. Today anyone can be a stock broker thanks to the internet. Investment companies permit their clients to use their services to research a stock or give advice on buying and selling. The investor is then able to purchase or sell stocks online at a cost of so much per “trade.”

Everyday the stock averages are compiled and made public. The Dow Jones Industrial Average provides details on 30 large industrial stocks, including General Motors, Goodyear, IBM and Exxon. The Standard and Poor 500 Index provides averages for 500 large companies. There are three major stock exchanges in the United States. These include NASDAQ (National Association of Securities Dealers Automated Quotations), Amex (American Stock Exchange) and the New York Stock Exchange.

The Securities and Exchange Commission (SEC) protect investors; maintains fair, orderly, and efficient markets; and facilitates capital formation. It mandates that companies provide financial information to individuals before they buy stock and to continue providing relevant financial information as long as the investor holds the stock. The SEC also oversees securities exchanges, securities brokers and dealers, investment advisors and mutual funds. The SEC has an obligation to enforce the nation’s securities laws. Each year hundreds of actions are taken against individuals and companies for insider trading, accounting fraud, and providing false or misleading information about securities and the companies that issue them.

The SEC works closely with Congress, other federal departments and agencies, the stock exchanges, state securities regulators, and various private sector organizations.

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Getting started in stocks and shares can be confusing for the beginner. Stock market investing can be very profitable though so it pays to learn some of the basics. Once you master those basics however it can also be great fun - even for a beginner.

Stock market investing can seem daunting at first because it is plagued by jargon and that's often the hardest part to get to grips with. To overcome the mystique of stock market terms and jargon you can buy specialized dictionaries which will explain them in simple terms. This as much as anything will help any new investor gain confidence by letting them in on the "secret code".

So what are the basic principles of investing in shares as a beginner? Stock market investing really comes down to finding hidden value in a company or companies that other people haven't spotted yet. That will enable the new investor to buy those shares at a cheaper price and then resell them for a higher price at a later date.

To help you spot those golden nuggets of hidden value you can either get the help of full service stock broking companies or alternatively you can begin to learn how to read stock market indicators for yourself. It is beyond the scope of this article to go into depth about these indicators but in simple terms they are methods of seeing if a stock is following a particular trend either up or down.

There are many different ways of measuring these trends with some becoming very convoluted but almost all of them are designed to find patterns that show that a stock is worth investigating further.

If you are new to investing you might want to consider employing the services of a full service broker and asking them to explain to you how they have come to the conclusions they have. You could then try to discover for yourself what made them recommend either buying or selling that individual set of shares by "reverse engineering" using some of the technical indicators. It's always useful with any investment to try to discover the "why" of the investment as this will help you to repeat your successes and avoid your failures again in the future.

Just a word of warning - be careful though because even for the beginner stock market investing can become addictive!

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If you are one of the average people out there in the United States who has only a little bit of money to invest, you may often say to yourself, “How does the stock market work? Can I invest if I don’t have millions of dollars to spare?” It can be intimidating at first, but once you learn the basics of investing in stocks, the stock market really isn’t all that difficult to understand. How does the stock market work? Here are the answers that can get you started on your way toward making some financial decisions that might just keep you in the black now and for years to come.

The basic premise of the stock market is to buy low and sell high. Maybe you have heard that before, but are you wondering just what you are buying and selling? Are you wondering how on earth you know what is considered low and what is considered high? Do you really understand what the stock market does?

First of all, let’s determine exactly what a stock is; a stock is a little piece of a company, often called a share. If you own a share of stock in Restaurant X, you own a tiny portion of Restaurant X, along with all the other shareholders, or stockholders, in that company. If you have bought your share(s) in a good company, Restaurant X will make a profit. If it does, the value of your stock increases because the restaurant is now worth more than it was before it made a profit. If something happens to cause Restaurant X to fumble a bit – let’s say the chef decides to leave the country with his fiancée – and the reputation of the restaurant falls as a result, and profits cease, you now own a tiny portion of a company that is not doing well. Therefore, the value of your stock decreases because the net worth of the company itself is declining.

That is really all there is to understanding the absolute basics of the stock market. The trick, of course, is to know how to choose the right companies to invest in and when to buy the shares and when to sell them. Ideally, of course, you will buy when a company is relatively new and the cost of each share is low as well. Then, when you have chosen wisely, this new company invents a miraculous product or explodes on the scene with a terrific service and makes a profit. Then, right before the company loses momentum, you sell and make a profit from your shares.

For example, you believe the recession will cause people to turn to religion, so you buy stock in a company that manufactures Bibles; you pay $10 per share and buy 10 shares, for a total investment of $100. Then, Bible Printers, Incorporated lands an overseas account and becomes the exclusive Bible supplier for South Africa. They are soon bringing in a huge profit, and since they are, more people want apiece of the pie. So, the cost of the stock goes up to $20 per share. You are ecstatic and decide to sell. You sell your 10 shares for $20 each, for a total income of $200. You have doubled your money. That’s how the stock market works on a good day.

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