The New York Stock Exchange is just an auction.  You know, like an auction where there’s a guy talking real fast to a bunch of buyers to sell Grandma Mable’s rocking chair and other furniture so she can move to Florida to be near her grandkids.

And different people keep bidding a higher and higher price until someone discovers they bid the highest price and now they own the rocking chair.

That’s all the New York Stock Exchange (NYSE) is, really.  An auction.

But instead of selling rocking chairs, they sell shares of stock in different companies.  And whoever bids the highest price just bought the stock.

Also, the NYSE is an auction on steroids.  Because instead of one auctioneer selling one thing at a time to a bunch of people, it’s a bunch of people selling and buying stocks from each other all at once.

They are out in the open on the floor of the NYSE crying out buy and sell orders to each other all at once and making all kinds of noise.

This is why it is called the “open outcry” system.  Really.  And it is so noisy many of them use hand signals as well.

It is one gigantic, noisy bunch of auctions all happening at once on the floor of the exchange as they trade stocks with each other.  So you won’t be surprised when I tell you they are called “floor traders.”

Actually, I should say they WERE called floor traders.  Because today this isn’t done so much.  Instead, the traders are buying and selling and holding all their simultaneous auctions with each other on their computers.

But it’s still the same thing — just not as noisy.  It’s an auction.  Kind of like E-Bay.  But much faster.

So when you buy or sell a stock, one of these traders gets your order and jumps into the auction to buy or sell it for you.  And you get the best price that another person is willing to pay.

Just like an auction, your shares of stock don’t have a fixed price.  They are only worth what someone will pay at the big auction.  But we will get into that more later.

For now, all you need to remember is that the New York Stock Exchange is just a big auction.  And they sell shares of stock at their auction.

So that was pretty easy, wasn’t it?

Have a nice day – John