The history of stock market is very rich and the efficient system that you use now for trading and investing in companies has evolved over centuries. All the policies and regulations have evolved through time as and when the policy makers felt the need for them. Wall Street was laid out as early as in 1685. The investment market was born after a century in 1792 when five securities were traded. These included three government bonds and two bank stocks.

The Buttonwood Agreement was the historic pact that around twenty four brokers and merchants signed agreeing to trade securities for commission. It is said that the New York Stock Exchange began as a result of this pact. Slowly the market started gaining prominence and securities such as bank stocks, insurance stocks and government bonds had begun to trade. As the market gained prominence, the requirement of rules and regulations for the proper conduct of trading and investing was felt. The New York Stock & Exchange Board was formed at wall street. In 1853, the board required the companies which were listed on the exchange to produce complete statements of shares outstanding and capital resources.

The first stock market crash happened in 1853 when the market lost up to 45% of value. The reason was the collapse of the Ohio Life Insurance & Trust Company. In 1866, the first transatlantic cable was laid which enabled instant communication between New York and London. In 1867, the first stock ticker was invented and this brought the current prices of the companies to all the investors. In 1872, the specialist was created. The specialist is a trader who trades only in one stock because of which he sits in one location on the trading floor. In 1895, it was suggested that companies start providing annual reports of their performance to their shareholders. Then in the subsequent year, there was another development in the form of the wall street journal publishing the Dow Jones Industrial average for the first time.

The Federal Reserve System was created in 1913 to bring structure to the control credit and to structure the banking system. The market price was quoted as a percentage of the par value. This was changed to prices quoted in dollars. In 1929 the largest crash in terms of the volume of shares takes place. This marked the beginning of the great depression. The Dow Jones reached the lowest value from its 1929 peak in 1932. It was quoting 89% down at that point of time. The Securities and Exchange Commission is established to provide full disclosure to investors and to prevent fraudulent activities in connection with the sale of securities. Women enter the trading floor in 1943 ending the reign of men. In 1966, several important developments took place. The Securities Investment Protection Corporation was set up to provide protection to the clients of brokerage firms that collapse. The New York futures exchange was formed in 1979. In 1996, real time tickers were launched in CNBC and CNN thus bringing the stock prices to investors and traders instantly.

As you can see, the rich history is incomparable to the history of any other stock market in the world. NYSE is the biggest stock exchange in the world and it will continue to remain so for some time to come.

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Some economists regard the 1929 stock market crash as major contributing factor to the great depression. The speculative boom of the 1920’s caused the crash because of the build up of the economic bubble. The bubble was formed because in the 1920s, as the stock prices were increasing, many people invested in the market. As the prices kept increasing they continued to invest hoping the prices would go up forever. Most people borrowed money to invest in the market.

 
This continued till about 1929. Then the market started trading down. Most people panicked and this resulted in heavy selling of stocks. By the year 1933, the stock prices were down 80% from the highs in 1929.

This led to people feeling poor. This led to decrease in the demand for various products in the market. Companies that tried to raise money in the market failed miserably. This led to shortage of money for manufacturing products or providing services. Companies started firing their employees because they wanted to scale down production. As you can guess, this led to the great depression. This period lasted about 4-5 years till 1934. All this was caused due to lack in confidence. This was preceded by confidence in the stock market. This turn of confidence was caused by a small negative sentiment in the market.

The speculative boom of the 1920’s was one of the factors that contributed towards the great depression. The speculative boom was caused due to the heavy investing in the market. The heavy investing was taking place due to most people trading on margin. Some traders were trading on 90% margin. The banks were also invested in the stock market. When the stock prices went down, people lost faith in the entire financial system and this lead to banks failing by the hundreds. This could have been avoided if there were proper regulatory procedures for the banks and the stock market in place. There should have been a limit on the margin you can use to trade. There should have been some restrictions on the banks from investing the depositors’ money in the stock market.

Needless to say, the regulators learnt a lot from this cash. It required some time before the trust in the financial system came back. The federal government then set up the federal deposit insurance corporation. Due to the presence of FDIC the banks could run out of money to pay back but still escape as the government reimbursed the depositors. The regulatory rules and procedures in place now are stricter and prevent the economy from crashing like it did in 1929.

You as an investor or a trader can learn a lot from this crash. In the late 1920’s people began to invest without doing any research about the stocks they were buying. In those times, the trader who was in the floor had more information than the common people trading. This led to lack of information among investors. Now, due to internet and disclosure policies, the common investor can have all the information about a company before investing in it. Good research will give you confidence about your investment and you will not panic when your stock price goes down or the general market conditions are bad.

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Stock market ticker is used to keep track of the share price of the companies that are listed in that particular exchange. Earlier stock market tickers were only put up in the exchanges and brokerage houses. As technology evolved, the stock market ticker started appearing on TV and soon these tickers were available on the internet provided as a service by various firms. Initially these tickers were available at a price to those who trade over the internet.

Now it is a free service by various news channels and the websites of brokerages and exchanges. The power of technology has truly revolutionised the way things work.

Stock market tickers now come with other advanced features that you can use as you use the ticker. You can keep track of the prices of the shares of stocks that you have in your portfolio in real time. These tickers also give you information about the highs and lows of the share price during the day and the volume of shares traded during the day. You can keep track of the networth of your investment in the stock market. There are also portfolio management features in these stock tickers that will help manage you your portfolio so that you can make maximum returns in the stock market. There is also a stock watch feature in which you can add all the stocks whose prices you want to keep track of. As and when the stock enters your buy range, you can buy the stock and reap the benefits of technology.

The tickers that are used these days are judged on the speed with which they relay the information to you and the ease of use. It has to be quite user friendly and the prices of any share of stock should be easily accessible by you. This has to happen quickly too as these days the stock prices move up or down in a matter of minutes.

Any service is judged on the customer service that it provides. There are a lot of tickers out there that are really easy to use and that provide good speed. But if you develop a problem with your ticker then you will be banking on the customer service of the firm to bail you out. Customer service can be gauged only by experiencing it firsthand. If you are new to the stock market and you are just learning to use the ticker, then it is better to use the ticker of your brokerage firm if it provides one or the ticker of a reputed firm. As you get used to the various terms and get used to the stock market functioning, you can try out the various free tickers that are available on the internet.

As you can see, the stock market ticker is a useful tool if you are an avid investor or trader in the stock market. Your work will definitely become easier as stock prices become easily accessible for you. This will definitely increase your efficiency which will directly increase the profits you make in the stock market.

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Since the creation of the internet, investors can now trade from anywhere in the country through their computer. This has resulted in the growth of the stock market. As well as that, any kind of investor can now participate in the stock market.

There are many rules when it comes to the stock market. New investors should be aware of them before they start to trade. Keeping up to date with each of the stock available is absolutely necessary. This is because the market is changing by the minute, and any of these big or small changes can have an adverse effect on the stock market. By keeping up the current events of the world, well versed investors can at times pre judge when and where these events can effect the stock prices, and how. This gives them a great advantage over other investors.

Each investor approaches the stock market differently. It depends on many different issues. Such as their time constraints, experience, knowledge, wants and needs and their level of profitability. There are three different common ways investors can approach the stock market. They are position trading, swing trading and day trading. Each of these approaches are different in their own way.

Position trading refers to investors who do it as a side-job. They tend to have less time to invest into the stock market. Position trading involves the two aspects of analysis, technical and fundamental. To be able to be a position trader, they have to be well versed in both. As well as the analysis, they are up to date on current news. The combination of these three aspects adds up to what they hope is a long-term plan towards trading shares on the stock market.

Swing trading is similar to position trading. However, swing traders focus on one type of industry. They focus all their efforts on this one industry, that in the end most swing traders can calculate correctly the outcomes of the shares in that industry. Like position trading, swing traders also focus on fundamental and technical analysis. It allows them a lot of free time as well, so most swing traders do this as a second job.

Lastly, there is day trading. Day trading is extremely different than swing trading or position trading. Day traders take this as their full-time job. They focus on the stock market all day, during the trading hours. They tend to make more then one buy/sell of shares in a day, this allows them to reduce holding any shares for a long time. Day traders purely focus on the technical analysis side of the shares. Fundamental analysis is of no use to them, because they trade on a daily basis.

Position trading, swing trading and day trading have their benefits. Deciding which to pick is up to the trader and their wants and needs. In the end, which ever is chosen, the investor shall be happy they participated in the stock market. This article has explained the differences between the three trading styles and the benefits of them.

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There is always risk in any stock traded, no matter how predictable a stock can be or how much research has been done on the stock. Risk on a stock is divided into two parts. There is market risk and specific risk. These two risks are very different. The differences between the two will be explained.

Market risk is risk that can not be diversified away. Market risk can also be referred to as systematic risk. This form of risk refers to matters that are out of the investors control. For example, changes in a stock price due to changes in the stock market. All forms of securities have market risk. This includes, bonds and stocks. Market risk is a mixture of the market, inflation rates and interest rates. For example, if the market suddenly increases, most stocks increase in value as well. However, if the market suddenly decreases, so does the value of the stock. These three factors can not be avoided by any investor. It effects everyone participating in the stock market. Thus, market risk can in no way be diversified away.

Specific risk on the other hand can be diversified away. Specific risk can also be referred to as unsystematic risk. Specific risks are risks that are unique to a stock. It includes business and financial risk related to the stock. As well as that, liquidity risk. The amount of specific risk can be reduced through diversification. An example of specific risk is, say news about a specific stock, where there is a strike by the employees in the company where there are shares you hold.

There is a system that is able to differentiate from market and specific risk effecting any particular stock. This system is called the fama-French tree factor model. It differentiates between the two risks by using three factors. Firstly there is the book to market ratio. Secondly there is the magnitude of the firm. Lastly there is the market portfolios return.

Firstly, the ratio referred to as the book to market ratio simply is the estimate of the companies worth divided by the magnitude of the firm. Secondly, the magnitude of the firm is brought about by the shares price times the added number of shares the firm has in the market. Thirdly, an index like S&P 500 is where the return on the market portfolio is retrieved from.

Under the fama-French three factor model, market risk is classified as the book to market ratio and the magnitude of the firm. This means, that for market risk, a higher amount of returns is expected. This is because market risk is out of the control of the investors and they are unable to diversify it, thus higher amounts of returns are expected. Specific risk is everything else. This form of risk can be diversified by investing not only in one stock but in many different company stocks.

This article has discussed the differences between market and specific risk. The fama-French three factor model has been explained and the ways in which it differentiates between market and specific risk.

Arkaitz Arteaga MarketStock.net