Introduction to Stock Trading

word cloud - stock market

What is Stock Trading?

For those of you who aren't completely sure what a stock is, it is a share in the ownership of a company. Stocks represent claims upon a company's assets and earnings. This means if you buy stock in Microsoft, you actually own a part of the company. The more stock you buy in a company the greater your percentage of ownership. It's important to point out that even though you may own a piece of the company you don't actually have any say in the day to day running of the company. As a shareholder of common equity, you are given one voting right per share owned, which allows you to elect a board of directors that will run the company.

Companies issue stock to raise capital for their day to day business activities. Companies use equity financing (issuing stock) as it doesn't require the company to pay back the invested funds nor make interest payments. In return shareholders have the opportunity of sharing in a company's success though they also risk losing all of their investment.

Dutch East India Company
A copy of the first stock issued by Dutch East India Company

Stock Market History

The first company to ever issue stock to the general public was the Dutch East India Company in 1602. The Dutch East India Company was formed in 1602 by a royal charter granting them a 20 year monopoly on trade with the East Indies and the sovereign right in to any new found territories.

The first stock exchange to begin operating was the Amsterdam Stock Exchange. It was opened in 1602 by the Dutch East India Company for the purpose of dealing in Dutch East India Company's printed stocks and bonds.

The first stock exchange in the United States was opened in Philadelphia, in 1790. It still operates, though is now owned by NASDAQ OMX.

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