What is the New York Stock Exchange?

The New York Stock Exchange (NYSE) is located in New York City. It is one of the biggest stock exchanges in the world and lists over 3,200 companies. The NYSE allows buyers and sellers to trade stock efficiently among each other. Just as a supermarket allows business to be conducted between merchants and consumers, the NYSE allows stock to be sold between buyers and sellers.

Since January 24, 2007, the Hybrid Market has allowed all NYSE stocks to be traded electronically, whereas before all business was conducted on the floor of the NYSE. The NYSE has a very specific way of doing business. Stock brokers have to go to the right location to buy their stock and it is run like an auction.

In order to trade on the floor, stock brokers must hold one of the 1,366 seats available. These seats are bought and sold similar to stocks. The price goes up and down just like stocks do and are generally very expensive.

When you watch the news during the financial segment, they often tell you how the Dow or the S&P 500 is doing. These are both Stock Market Indexes. The Dow is short for Dow Jones Industrial Average. It includes 30 large companies.

The value of the Dow is computed using a price-weighted average. This is done by adding up all the prices of each of the 30 stocks and then dividing it by 30. This keeps a proportionate number among each of the stocks. The Dow is looked at as a portfolio holding one share of each stock each at the same price (after the price-weighted computation).

The S&P 500 is often considered a better index to look at because it includes 500 stocks and is market value-weighted. They compute the value based upon the market value of the shares outstanding. An example would be if one stock has three times as many stock outstanding, it will be counted three times as much.

Market Value Indexes are used to see how to stock market is doing. By looking at how the Dow did last year compared to how it's doing now, we can see relatively how well the market is doing. The same goes for the S&P 500 any other indexes.

If you don't understand the NYSE and how it works, you'll have trouble when buying and selling stock. Understanding the indexes will also help you when you're doing research. Use them to your advantage.