Most people switch off when they hear the words “stock market”, but if you know how to shop in a mall, you’ll easily be able to trade shares.

If you’ve ever negotiated and haggled on the price of a pair of shoes or a even a car, the concept of a stock market shouldn’t be all that foreign to you. Essentially, a stock market is a meeting place for that’s stock’s shares and the people who want to buy them.

Of course it’s a bit more complicated that just demand and supply, but that’s the basis upon which all stock market systems work. It’s a means for big companies like Nike and Pepsi to go public with their stock, which means more opportunity for them to make money and ordinary people like you and me can make bids on their shares.

You can even make bids on the big stock markets like the New York Stock Exchange (NYSE) and Johannesburg Stock Exchange (JSE). The NYSE is probably the best-known stock exchange in the world. Companies listed there are also listed on smaller stock exchanges around the United States, mainly so they can gain more exposure over a larger area, therefore increasing amount of activity within their business.

The more activity within a business, the higher the share price and vice versa.

The people you always see shouting at the huge electronic boards are the brokers, and they’re the middlemen between the buyer and the seller. It’s their job to match a buyer and seller who agree on a price for a share.

You as the buyer or the seller are never really involved in the actual process - all you do is alert your broker about what you want and he or she takes care of the behind-the-scenes business for you. It’s a good idea to enlist the help of a broker if you’re interested in getting into the stock market.

Computer technology is a key element in modern stock market systems, and NASDAQ is the forerunner as far as electronic systems go. Before NASDAQ, all stock markets were floor-based, but today NASDAQ is the largest American electronic stock market and boasts a massive electronic network handling over 30 000 messages a day.

Most of the big stock exchanges around the world are starting to implement the same kind of technology, and soon there won’t be a need for the human element in the business of share trading.

Because the stock exchange is like an open market, everyone can see share prices and how the prices fluctuate almost every second of the day. Trading on the stock exchange is attractive because it offers liquidity, which means that investors can quickly and easily buy and sell shares.

On the other hand, there is some risk involved because not every investment opportunity that presents itself is a good one. Prices are easily affected by a number of factors, most of them involving news and current affairs.

The rise and fall of share prices don’t only affect investors - everyone feels the effect of fluctuating prices, like when the oil prices rise and fall. If you’re new to the game, be careful about where and with whom you invest. Get your information from as many sources as possible and make informed choices.

Stock market investing can be a very profitable part time activity or a full time occupation… but beware of the pitfalls. You can be flying high today and wiped out tomorrow.

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Good Luck,
Sarah Newman