STOCK MARKET TRADING VOLUME
The Internet has played a big part in changing the U.S. stock market and other markets around the world. One of the most significant ways is that it has made buying and selling stocks cheaper and easier for everyone. As a result you can see how the NYSE trading volume has soared ever since computers and the Internet became an everyday part of our lives. See the chart below:
Before The Internet, It Was Harder To Trade Stocks
Things have changed a lot since I first got interested in learning how to buy stocks in the middle to late 1980′s. I distinctly remember going to a stock broker that my Dad recommended and I was very nervous. I had a check for $20,000 in my pocket and I wanted to open up my first account so I could start trading.
I sat down at the stock broker’s desk and he started asking me all sorts of questions. He asked about my net worth and other things I really didn’t think were any of his business which made me even more uncomfortable. Then he asked me what my investing goals were and I said, “I want to make money!” He explained that their job was to ascertain what my financial position was and what I wanted out of stock investing so their company could better help me reach my goal. In other words, he wanted to know what kind of investing I wanted to do: how much risk I wanted to take and how aggressive I wanted to be with my stock picks and money.
All this was standard questioning for anyone opening an account with them but it was quite intimidating for someone like me who had never even bought a stock before. I was embarrassed because I knew so little and was being questioned by someone who does this for a living. I didn’t want to look like a fool!
With that account I opened, every time I wanted to buy or sell any stock I had to give that same broker a call to execute the trade. I remember I would always hope he wouldn’t start asking me more questions that I would have difficulty answering. I really disliked having to make that call.
I can’t remember exactly what the price per stock trade was in those days but it seems like somewhere around $40 sound about right. My Dad on the other hand, had and still does have and account with Merrill Lynch where he pays over $100 per trade! They are a full service broker and he can call up and get advice any time he wants though.
The Internet Changed Everything
You can see in the chart above how dramatic an effect the Internet has had on trading volume. It has absolutely soared and that is the result of much cheaper trades and the ease of trading. No longer do you have to go into someone’s office to open up an account like I did in the 80′s. Now anyone can quickly apply for an account online at any one of a dozen online discount brokers and be up and running as soon as they can get the account funded. No more uncomfortable questions from your broker to deal with either!
The cost of trading is the biggest reason volume has gone up. Most online brokers charge $9.95 or less for every trade and they can be executed in seconds by anyone who knows how to use a computer. I have been using E*Trade since about 2003 (see my E*Trade review) and have been very happy with them. Personally, the ease of trading has meant more buys and sells for me compared to the “old” days when I had to pick up the phone every time I wanted to do something.
The Internet has made it so much easier to trade stocks that more people are doing it and they are being more active as well. There are also people who day trade which increases trading volume immensely. The stock market and everything around it is so different than it was before we had the Internet: there is MSNBC which is a cable station just about stocks and finance and there are all sorts of other business shows on television and radio.
All this has led to a great increase in the interest of stocks and trading volume has exploded. Our lives have all changed dramatically in the last 10 years with the rise of cable television and the Internet making information so much easier to find and use.
