Stock Market

The stock market is an open public market where the trading of company stocks and derivatives takes place at different settled prices. The stock market appears in the news on a daily basis. The media shows the rise and fall of prices of stocks as they happen.

What Stocks Are

Stocks are simply shares in the ownership of a company. They embody the rights of an owner to the company’s profits and assets. When a person buys more stocks in a company, it means he shares more of the profits and assets of the company. A stock can also be termed as equity or shares.

To become a shareowner of a company’s stocks, one must purchase stocks at the stock market. Ownership of a company’s stocks entitles the buyer with the right to a certain portion of everything that the company owns, including voting rights with regard to the stock.

Where to Buy Stocks

Obviously, one buys stocks at a stock exchange. All stocks can be found listed on the stock exchanges. The New York Stock Exchange or NYSE is the largest stock market in the United States. In Canada, the largest stock market is the Toronto Stock Exchange or TSX. Other top stock exchanges include the London Stock Exchange in UK, the Tokyo Stock Exchange in Japan, The Bombay Stock Exchange in India, and the BMV in Latin America.

The Purpose of the Stock Market

Companies raise money through the stock market. When a company is in need of expansion, or has to raise additional capital, it sells shares of company ownership to the public by listing its shares on the stock exchange. The stock exchange offers liquidity that allows investors to sell securities easily and as quick as possible. This makes stock trading a less risky investment than that in real estate.

The stock market also plays a crucial role in a country’s economy. More often than not, it is the prime indicator of a country’s economic strength. When the prices of stocks are on the rise, it indicates a healthy growing economy. It means that companies are increasing their business investments and making more profit than losses.

Stock markets have a variety of players ranging from small individual investors to large institutional investors like mutual funds, pension funds, banks and hedge funds. The total size of the stock market worldwide (all stock market exchanges worldwide) is estimated to be over $50 trillion USD.

Stock Trading

Investors in the stock market range from individual investors to hedge fund traders. Investors can be located in any country or city. Trading usually occurs between a company, a stock broker, and an investor. When companies open up stocks in the market, investors place orders usually with the help of stock brokers. Stock brokers are trained professionals who act as middlemen between companies selling stocks and investors. These professionals make the buying and selling of stocks easier between the two other entities – the buyer and the seller. Usually, buying and selling of stocks occurs on a trading floor, through a process called open outcry. Other methods of trading are online through virtual trading. While actual trading is done through bidding at the trading floor, virtual trading is done through online transactions.

Through the stock exchange, the exchange of securities between sellers and buyers is made more efficient. As the prices rise and fall, investors either win or lose, just like with other types of investments.

The stock market is one of the main ways for corporations to raise money. This is done thorough Initial Public Offering (IPO). When you buy a stock in particular company, you buy part of the company. Most trades done on the stock market are done through stockbrokers. The price of each individual stock traded on the stock market is set in an open-market environment, by a computerized trading platform, depending on the bid and ask price for this stock.