Day Trading - E-book - ePub

Financial securities, financial commodities and other suchfungible items are traded in financial market. Transaction costsare comparatively low in such market. Moreover, prices of theseitems reflect their supply and demand as well. In financialsecurities, items such as stock and bonds are usually included. On the other hand, precious metals or agricultural products arepart of financial commodities.
Economics however, defines market as aggregate of sellers andpotential buyers of a specific item or certain service andtransaction that takes place between buyer and seller. It meansthere are three main components to form a complete marketbody. Those are sellers of the item or service, buyer of theitem or service and transaction that take place between thesetwo parties. Such transactions usually involve exchange of aparticular item in return of money, or other item / wealth.
However, sometimes term market is used strictly to referexchanges or organizations that work in order to facilitatetrading of financial securities or financial commodities. Variousstock exchanges and commodity exchanges are great examplesof such organizations. These organizations can either be physicalor electronic systems. Examples of physical locations are NYSE, BSE and NSE. They can also be electronic systems without anyphysical existence and NASDAQ is the greatest availableexample for demonstrating such system.
Most of the tradingrelated to stocks and bonds usually take place at exchange. However, corporate actions such as merger and spinoff takeplace outside or without a stock exchange. Moreover, if onecompany decided to sell their stock to other one with theiragreement, there will be no requirement for stock exchange insuch initial transaction. Most trading of currencies and bonds are usually based onbilaterally.
There are still many people who prefer to use stockexchanges as medium for trading, buying and selling stocks. Onthe other hand, there are also some people developingelectronic systems that serve the same purpose as a physicallyexisting stock exchange does. Day trading is an important concept or say component ofstock exchange and trading. In upcoming chapters, variousaspects related to this concept will be covered with deep details.