How to trade on the NYSE

Автор: Martin Moni
Martin Moni
All publications of the author

The New York Stock Exchange (NYSE) is not only the most active exchange in the whole world, but the most prestigious too. It has the listing of 2,400 companies from all over the world, totalling a market capitalization of $19.3 trillion. This is almost as much GDP generated by the entire United States economy and about 20% of the entire world’s GDP.

That alone should whet the appetite of any trader, and I would encourage anyone seeking an investment opportunity to consider trading on the NYSE.

There is no doubt that the NYSE is the most prestigious exchange in the world, and many companies clamour to have their stocks listed there. Some of the notable listings on the NYSE include:

  • AT & T
  • Blackrock
  • Bank of America
  • BP
  • ExxonMobil
  • FXCM
  • HP Inc.
  • HSBC Holdings
  • Goldman Sachs
  • JPMorgan Chase
  • Pfizer Inc.
  • Royal Dutch Shell
  • Verizon Communications Inc.
  • Twitter
  • Walmart

Structure of the NYSE

To be able to trade in the NYSE, you first need to understand how the trading structure is who handles the trade orders. Here, there are 3 main players:

Floor brokers

These are the individuals you see in the news shouting into their phones and yelling at one another around a column full of computer screens. They are hired by companies such as hedge funds, investment banks and even brokers to execute trades on their behalf. Becoming a floor broker requires a license, which was being offered at $50,000 in 2015, and that gives you access to the latest figures on share prices and instant execution.

This is one of the ways you can trade on the NYSE, but besides the licensing fee, it requires that you have a huge capital to trade with. If you’re thinking about trading on this exchange, this might not be the best option.

Supplemental liquidity providers (SLP)

These are basically companies with huge financial capital who are assigned certain securities and stocks listed in the NYSE. As a requirement, they are supposed to make trades valued at $10 million or more every day in order to keep receiving the favourable quotes on stock prices with little spreads.

Again, this would not be an ideal position to find yourself in as an individual trader. These positions are created to ensure that the NYSE has a high liquidity all day, and some of them might be brokers with whom high volume traders can do business with.

Designated market makers (DMM)

This is the best resource for trading stocks and other instruments listed on the NYSE. Most DMMs are brokers who offer stocks, futures, commodities and bonds available to traders. Even though they may not have as lucrative leverage percentages as regular Forex brokers, you can still find some with attractive leverages.

Steps to trading on the NYSE

Before you can start your trading career on the NYSE, there are several requirements you are going to need. Most of these are easy to acquire, but you still need to carefully consider your options. The primary tools you need are:

A broker

A Forex broker will be the acting as a direct market maker who will offer you a platform and give you access to the stocks listed on the NYSE. Check our Forex broker rating to find out if your preferred broker offers this service and how they stack up to the other brokers.

A good broker is the one who will have a low commission charged on every transaction and also provide your preferred instrument. You see, with over 2,400 companies listed as well as other instruments such as bonds and commodities being traded on the NYSE, it is impossible for any one broker to offer all these options. Therefore, you should be careful while choosing a Forex broker to ensure they offer what you would like to trade.

Ideally, you would want to have a US broker, but there are other NYSE brokers you can use. The choice should be yours depending on their conditions.

Trading platform

You may already have seen pictures or videos of the NYSE floor where many traders can be seen speaking into phones, shouting out orders while observing stock prices on screens. The image of the trading floor seems very hectic, and fortunately you don’t have to be on that floor to place trades. In fact, becoming a floor trader is very difficult, and you can do the same thing they are from the comfort of your home on your PC or smartphone.

There are various Forex trading platforms that will allow you to trade stocks on the NYSE, and some of the most popular include:

  • Ninja Trader
  • Fusion
  • Graybox
  • Laser

Most of the best banks offering Forex trading will also allow you to trade stocks on the NYSE, offering a more hands-on experience. Besides, making trades through a bank will have the added benefit of a financial advisor to give you tips on the stocks that may be the most profitable.

Timing

Unlike the Forex market, the NYSE is not open 24 hours, so you will need to be aware of the opening and closing times. Trading begins when the bell is rung at 9:30am Eastern Time until the closing bell is again rung at 4:00pm Eastern Time. If you’re going to be trading on the NYSE, these times should be marked on your calendar, or set an alarm if you don’t want to miss the opening bell.

Trading volume is usually highest near the closing and opening bells as traders rush to close and open their trades respectively. During the midday in New York, around 1pm Eastern Time, there is a slump in trading volume and volatility, and it is not the best time to enter a trade.

Trading the NYSE index

It should be clear by now that trading stocks and other instruments listed on the NYSE can be a bit complicated. DMMs may charge high commissions, the trading platforms are not free and can be very different from the Forex trading platforms you are used to like MetaTrader or cTrader, forcing you up a learning curve. So, what to do to undercut all these challenges?

How about trading the NYSE index, which is commonly offered by Forex brokers; compare Forex brokers to find which ones offer the NYSE index. The NYSE index combines the performance of all the listed companies to create an average value, which can be traded as an index. It may not have as much volatility as the individual stocks, but it is still a gateway to trading on the NYSE.

Why you should trade the NYSE

There are several reasons why the NYSE has become a favourite among traders from all over the world, and the same reasons should draw you into the same platform.

Security of funds

Despite having over 2,400 companies listed, the NYSE is still very highly regulated by the SEC, and any company wishing to be listed on the NYSE must file the required forms by SEC. Any trader can see this information from the SEC website to determine if the company is worth investing in. In addition, there is a huge number of major investors such as hedge funds and investment banks who ensure there is a lot of scrutiny in the exchange.

For an investor, this is a much safer investment option compared to penny stocks which are offered through an initial public offering (IPO). Such penny stocks may be very cheap to buy per share since they are offered at less than $5 per share, but almost 99% of these shares don’t grow beyond their initial share price. Stocks listed on the NYSE may cost as much as $100 or more, but these companies are a lot more stable and provide security for an investor’s funds.

High volatility

Volatility is created by high volume traders such as investment banks, hedge funds and the supplemental liquidity providers (SLPs). In a single day, trading volume exceeds $200 billion and this keeps the liquidity very high, even though it might not be as high as the Forex market.

Also because of the huge number of investors and traders keeping their eye on listed securities, volatility is created by news announcements that alter market sentiment. For example, Twitter’s stock shot up by 21.5% on the 23rd of September 2016 when there were rumours Alphabet, Google’s mother company, was planning on acquiring it. There are plenty of these situations most days, and these create a high volatility that traders crave to get in on.

Here is an interesting report directly from the NYSE. Check it out:

Learn the ropes

Finally, a word of advice. Trading on the NYSE is may appear similar to trading the Forex market, but it’s not exactly the same. It is best to first start with a demo account provided by your broker, and then investing your own money after you have fully grasped how the system works. Better yet, why not invest your money in a PAMM account with a manager linked to the NYSE. If this seems like something you might like, check out our PAMM Forex brokers rating to identify the most qualified and profitable PAMM accounts.


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