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Hey, JB here, the wolf of Wall Street for a special episode of the wolf's then deserves a drum roll by the way. That's a specialist episode is its combination podcast learning episode. It's just going to be me and what I want to talk about today is a very important topic. It's topic that I typically shy away from. But today I'm going to dive in deep because I think everybody needs to hear this stuff. Learn about it.

Because I keep getting asked the same questions again and again and what's amazing is when I start talking about this subject, it just absolutely shocks me how little people know even people are supposedly schooled at this stuff and do it actually or in this industry at least on a daily basis for themselves casually to do it every day.

They have no idea what's really driving it. Why things are the way they are. How we got to this place. So I think it's really important that everybody learns about this and understands what's going on. What I'm talking about is Wall Street. I'm talking about how stocks trade, why they trade the way they do, how they even come to trade.

I think that people right now are literally flying blind out there without a cane because they don't understand what's really going on with stocks in general. They don't know how they even come to be.

So what I want to do here in this episode is I want to just take a little bit of time to demystify Wall Street for you and explain to you what's going on, how this all started and what makes the stock market work.

All right. So let's start at the beginning. For those of you who are bored by this, well, then just don't listen. Okay. But to me, this could be one of the most important podcasts you ever listened to because we should all know what's going on in the world and how we go out and invest safely.

All right. So I'm not going to be giving you specific investment advice in one stock right now, but I want to explain to you how the market works in general. So you know why things are going crazy with game stop and things like AMC.

What the shorts are up to? What the longs doing? How the hedge funds operate? What's going on behind the scenes in the shadows? And why is it allowed to happen this way? And why is it changing? All right.

So let me go back to the beginning. Just to understand what happens on a stock exchange or on the NASDAQ. There's a difference. So the NASDAQ is what's called the decentralized stock exchange versus the New York Stock Exchange theoretically everything trades in one place.

Like it's the New York Stock Exchange stocks are listed there. You have specialists in these stocks. That's where they trade now over the years that line has become blurred because there's a lot of all party traders and a lot of things now happen outside the stock exchange. But just to understand how it started.

It's very important. You understand how this old again started back in the good old days with really two types of exchanges. You had the New York Stock Exchange which was basically an auction market where you have one specialist and a stock that wanted to trade but actually list on the stock exchange and I'll explain what that means in a second.

And then you could have the other model was the NASDAQ which was actually decentralized where there was not any one particular place. There was multiple market makers all over. You could have every broker term represent as a market maker. So for example, if you looked at a stock like Facebook, right.

I'm going to go back like 20, 30 years here. So let's use Microsoft. It's just easy to explain. They don't break a current view. Right. So Microsoft, right. Let's say Microsoft is trained by $50 to $50 and one eighth. There's always two prices. This 50 dollars is called the bid and 52 one eighth means 50.125 back when it trading eights in the olden days. Right. So you had two size to that market. That's called the bid and the ask when you sell something you sell it at the lower price. That's the bid.

So you want to sell you to it's called hit the bid when you want to buy you have to take the offer. So you pay the higher price that middle ground between those two with that spread. Right. That's theoretically where traders and brokers make their commission. So simply because there's a spread to the two every time.

If you are buying it 50 and selling it 50 and eight as a market maker. That's how you make your money theoretically. There's many other ways they make money as well. But that's the simple story on the New York Stock Exchange. If you have a specialist.

Okay is one person who's seeing all the orders is back in the olden days. Right. And you could have a bit in the ass there, but they're both sides of the market.

Okay. And they're essentially operating as an intermediary and they're looking at orders and they are setting the market one person versus the Nasdaq. So it might be 50 to an eighth. You might have 40 people that are bidding at 49 and seven days. They're bidding right below that 50.

So they're right below the 50. You never saw that. If you were just a regular investor, all you see is 50. But below that 50, you have all these other bids at lower prices.

So when you sell into that bid of 50 dollars, right. Well, you can sell a certain amount into that bid that the stock would go lower. You would see the stock tick down in the same way you can see the stock at 50 to an eighth. Right.

It might be 20 other people at 50 in a quarter of three is at prices above that. So all you're seeing when you look at a traditional like what on your phone right now and you see a stock price or a spread between the two.

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