Home Share&Stock Trading The Basics

The Basics

by Darryl Beck

Back when I was a kid, I used to trade baseball cards with my friends. Those cards can be acquired by buying what is called a “booster pack” where every pack has a different set of cards.

Trading, in that sense, meant that I am trading my cards for your cards. However, “trading stocks” is actually quite different.

Trading in the context of the stock market means that you are going to buy or sell stocks, depending on your needs.

The stock market is a network of traders and investors and there are millions of participants all around the world. Finding the right company to buy shares from can be a bit of a chore, but once you acquire some and you sell it at the right time, you will have the chance to earn a lot of money.

There are two basic methods of trading in the share market: On the Stock Exchange Floor or online.

The Two Methods

Exchanging on the floor has been the standard for so many decades now that it is still quite popular to this day. Some people prefer the conventional, even though that modern technology gives us the convenience to do the trades anywhere except the home floor.

In fact, many investors are pushing more towards the more modern approach to trading, however, it has consistently been met with some resistance. As the saying goes, “old habits do not die.”

So, how do the two methods differ from each other? Here are their stark differences:

Exchange Floor

This is the traditional method of trading in the stock exchange even in the stock exchange firm in Malaysia. In fact, you might have seen the confines of the New York Stock Exchange (NYSE) thanks to numerous movies about the stock market.

Doing the old method is like going into war: it is chaos in there. As soon as the bell rings, which signifies the opening of the market, you will see tons of people looking at the huge monitors for current trends, you see people whipping out their phones and calling their clients or brokers, and you can see plenty of people making use of the terminals to conduct their trades.

The only time the exchange floor calms down is if the trading day ends, which usually happens by 4 PM.

The process of ordering trade looks like this:

Broker Calls a Specific Market→Floor trader picks up the order→Floor Trader goes to the company to buy X amount of shares needed by the broker→Once the buyer and the seller agree on the price, the shares are sold/bought.

Online

The more modern approach is moving towards electronic trades. More and more companies and traders alike are using online trading platforms because it is fast, efficient, and the orders can be made in an instant.

You will still need the help of a broker as they will act as your intermediary to the companies you want to buy stocks from. The process is the same to that of the traditional method, only that it is done online.

Conclusion

If you ask me which method should you choose, I would definitely recommend doing online trades. You do not have to experience the hassle of looking at tons of people in a chaotic environment.