HOW STOCK MARKET WORKS?
Curious about the stock market? Learn how it works, how stocks are traded, and how it helps investors and businesses grow. Dive into the world of trading today!
EDUCATIONGENERAL
12/31/20241 min read
How Does the Stock Market Work?
The stock market plays a vital role in the global economy, providing a platform where investors and companies meet to exchange ownership of businesses in the form of stocks. Understanding how the stock market works is key to making informed investment decisions and appreciating its impact on the economy
What is the Stock Market?
The stock market is a network of exchanges where shares of publicly traded companies are bought and sold. Major stock exchanges, such as the New York Stock Exchange (NYSE) and the Nasdaq, serve as hubs for this activity. Companies list their shares on these exchanges to raise capital for growth, while investors purchase shares to earn returns through price appreciation and dividends.
How Does It Work?
Stock Issuance: Companies issue shares to the public through an IPO. Once listed, these shares are traded on stock exchanges.
Trading Mechanism: Buyers and sellers place orders to buy or sell stocks. Orders are matched electronically or through a market maker, who ensures liquidity.
Price Determination: Stock prices are influenced by supply and demand. When demand for a stock is high, its price rises, and when demand is low, its price falls.
Ownership: Purchasing shares gives investors partial ownership in the company. They may earn returns through dividends (a share of the company’s profits) or capital gains (selling shares at a higher price).
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