How The Stock Market Works

How The Stock Market Works

You may have heard of the stock market but have you ever wonder how the entire stock market works? In this article, we will tell you about everything you need to know about the Stock Market and how it works in simple English. Meanwhile, you need to understand few things about stocks before we dive into how the stock market works.

What is Stock?

Before you can understanding the workings of the Stock Market, you must first have an understanding of what a stock is. What is a Stock? A stock is basically a piece of ownership or equity in a company. In order for a company to sell stocks to the public, it must be publicly traded. We will explain later what a public company means. For now, all you should focus on is the definition and meaning of a stock. Stock has variety of definitions but they all mean the same so don’t worry. Lots of people also want to know if it’s possible to make a living from the stock Market.

What is a public Company

In order for a company to sell stocks to the public or be listed on a stock exchange, It has to go public. The process is called initial public offering or IPO. An IPO to simply put it, is the first time a private company becomes a publicly traded company. IPO helps a private company to start selling stocks to the public.

When a company goes public, then investors like you can now buy shares or a piece of the ownership of that company.

How is a stock price determined

During a company initial public offering or IPO, an initial price of the company is issued. Some companies are sometimes overvalued. However the IPO process helps initial investors of a company to cash out or sell there share during the IPO. The stock price of a company is set based on the valuation of the company divided by the total amount of shares to be issued. IPO is often beneficial to initial investors or large financial films.

How stock/share market works

Now that you know what a stock is and the type of companies listed on the stock Market. Lets now answer the question of how a stock market works. The stock market works through company going public to offer shares to investors in order to raise money for growth or expansion. Investors then buy the shares from the company and hope the value of the share goes up to sell it at a later date for profit. The process is repeated over and over and that’s how the stock market works.

The process of buying and selling of stocks occurs on the Stock Market. In other words, the stock market is a place where people buy and sell stocks or shares. You can also refer to the stock market as a place where stocks or shares are traded.

The entire Stock market is move by buyers and sellers. There are some key economic events that usually shifts the sentiment of the market into Bearish or Bullish. Events like inflation, war, virus epidemic can all affect the stock market.

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