In this article, we will focus in particular on the practical aspects of NYSE and NASDAQ trading, and also on the benefits of Forex and CFD trading.
What is NYSE, NASDAQ and AMEX?
The US stock market is rightly considered a global financial center. Here are daily traded shares and other assets worth billions of dollars. Companies from all over the world are trying to list stocks in the US stock market.
NYSE (New York Stock Exchange) – the oldest in the US and the world’s largest stock exchange. Its stock turnover is about $ 60 billion a day. There are around 4200 different shares with a total value of $ 21 trillion. NYSE’s trading is done through the “auction” type and the entire transaction process is absolutely open. The NYSE Hybrid Market has been on the stock market lately, allowing it to increase the speed and volume of e-commerce, the idea is to reduce the impact of specialists and provide more opportunities for Internet traders.
NASDAQ (National Association of Securities Dealers Automated Quotations) – an electronic network that connects participants to the trade electronically. NASDAQ is the first US electronic exchange. Quotations are maintained by multiple Market Makers who compete with each other by disclosing bid quotations (BID / ASK). With one share an average of about 14 marketers work out of the spread and favor its narrowing. There are 2770 companies listed on this stock exchange, they are mainly related to computer, bio and innovative technologies. That is why the NADAQ index is also known as the “US Technology Index”.
AMEX (American Stock Exchange) is an exchange in New York where the trade with ETF and HOLDRS (depository receipts equivalent to several shares of a particular company) is the most common. Transactions are automatically redeemed here. The requirements are quite liberal compared to NASDAQ and NYSE, which in turn allows relatively young, medium and small companies to list their stock for trading.
If we take advantage of finviz services, we can understand the exact number of instruments traded on these exchanges. At the end of 2016, there are 4235 NYSE, 2771 NASDAQ, and 82 AMEX, and OTC market. Together, there are over 12,000 instruments and there is always something to trade, no matter the style of trade, there is always room for any strategy.
Professional traders have access to platforms such as Lightspeed or Sterling Trader Pro that provide direct access (DMA) to these exchanges and are therefore able to trade all NYSE, NASDAQ, or AMEX listed shares. Trading on these three exchanges has no significant difference.
Stock Market Specifics
As you know, most traders start with the most famous and “developed” – advertising market – Forex, so it is appropriate to look at it with regard to the stock market.
Unlike currency and CFD instruments, the stock market may even be a “ordinary” trader (under the ordinary we mean individual players with micro-deposits of several thousand dollars) to be a market maker and move the price of instruments with low liquidity. Often, of course, this is possible on OTC shares. That’s why many traders with small accounts are turning to Peny stocks, where they can be a factor and counteract price movements. Often, a limited purchase order for several thousand shares at a current price of $ 0.50 may be a key backing for the price to bounce back. There is nothing better for a former Forex trader to see how it directly influences the price movement or to bluff the other players by placing lying orders with large but fictitious volumes.
Another huge, incomparable, advantage over Forex and MetaTrader are the professional trading platforms for trading on the stock markets. They provide significantly more information about the market. From the very first contact with such information, everyone is beginning to wonder how he had previously hoped for some success in the trade. You will see the bar of transactions, you have access to the full Level 2 (NYSE open book, Nasdaq open + total view, BATS book and more), this allows you to recognize the big players, see real volumes, block tycoons, big orders in Dark pool liquidity and many other things that lead to long-lasting success in trading. You can read more about this topic here.
Another very nice moment for traders who have moved from Forex to US stock markets is that the quotes for all brokers are the same.
The stock market benefits from all the reliability and regulation parameters of the Forex industry and brokers offering between 50 and 100 CFDs whose deals are nowhere to be traced, simply because you do not buy anything and sell nothing. But on these topics, we will try to talk in our next articles, where we will compare Forex and the stock market, and we’ll talk a bit more about such concepts as A-book and B-book as well as the work of Forex Brokers.
Real-estate brokers providing real-world access through professional software benefit from commissions, and they appear when the trader is working steadily and over the long term, for the broker to be a vital necessity for customers to earn and trade with increasing volumes rather than they lose their money. This statement is often referred to by Forex brokers, but unfortunately it is more rhetoric than real practice. Besides, through a broker there is another option to access these platforms and markets through a pros. When access is through a pros, the team will do their best to teach you how to earn, as the company’s profit is a percentage of the trader’s earnings. That is where you will meet the term “Payout”, namely how much of your profit remains for you and how much for the pros. On the other hand, pros companies work with brokers who give them particularly good trading conditions (such conditions will never be obtained as a retail trader’s client) because the broker is particularly interested in profiting the company by profiting the company with its dozens of traders is a big client for the broker, often such organizations rotate over 10,000,000 shares every day. It is this relationship between brokers and clients or between pro companies and traders that is key to building teamwork where there is no conflict of interest. With CFD, the trade is the opposite, there is a clear conflict of interest between the broker and the client, as the loss of the customer is the return of the company and vice versa – in 90% of the cases, the client’s profits are paid by the broker.
Some of you are probably worried that the use of such trading terminals, providing a lot of information and countless functionalities, is a very complicated, confusing and even impossible task. This is a very misconception. Most traders assume 80% of the platforms within a month. Others worry that everything will be in English, and that will be a big hurdle, but they are confusing again. Although information on US stocks is entirely in English, it is not necessary for your knowledge to be on a very high level. In addition to news, traders also use different algorithms for stock selection, screens and analytics, but these softwares are a good enough and low-level English language, the rest is just a trading!
Do you trade or invest?
What distinguishes the trade from the investment? Above all, during the retention period.
Trading can be in the form of “Scalping” when the position is held within a few minutes, “Intraday Trading” when the position opens and closes within the session and “Over Nite” when the position is left open until the next session or just for more than one day. To hold “Over Nite” positions requires a solid experience and the risk is not small. Mass traders close all positions at the end of each session. Finally, as something very different from the above-mentioned styles, investment comes, it involves buying and retention of assets, the classic strategy – Buy & Hold. With Forex, it’s almost impossible to earn good money by investing in the “Buy & Hold” style. Forex is not a trend market. Each currency in itself and each currency pair move in a wide range. In short, Forex is a ranch market with a very small percentage change in price, while stocks are trendy. The relatively high efficiency of the stock market is a good prerequisite for investing. When the market moves upwards, the shares of different companies sometimes grow by hundreds of percent. Trends are stable and steady, the direction does not change for years. As you can see from the movement of the S & P500 index (the chart below), from 2009 until now the direction has not changed. Try to find such a currency pair with such a pronounced trend and such a percentage increase! This is the reason why you have not heard someone invest in long-term currencies except in some exceptional circumstances, such as what is now happening with USD / TRY or what happened to the Ukrainian currency against the USD. But you understand that if you rely only on such events, life will hardly come to you in order to gain experience and money.