How The Stock Market Works?

The first thing that users need to know about the stock market is that it is the place where public shares of the most famous companies are traded (bought and sold). Investors are the ones that purchase the stocks and are entitled to owning a small fraction of the said corporation. The ones that put their shares up for sale are basically giving up their right of ownership to a third-party.

The five biggest stock exchanges in the world are the New York Stock Exchange (NYSE), NASDAQ, London Stock Exchange, Japan Stock Exchange, and the Shanghai Stock Exchange. They work Monday through Friday during the set business hours of the given countries where they are located in.

Trading in the stock market comes with its associated advantages and applied risk factors. Any experienced financier will tell the newbie that handling monetary exchanges always involves a certain degree of speculation. There are lots of true stories about traders who went from rags to riches and vice versa in a matter of seconds.

Asset prices have high volatility rates and are prone to sudden movements and rapid value shifts. A political scandal or natural disaster can make a given company’s shares to drop or rise unexpectedly. Keeping track of stock market news and comparing them to value shifts can help users learn how to recognize crucial trends and patterns.

Where Do The Bear & The Bull Meet?

The terms ‘bearish’ and ‘bullish’ markets are actually derived from the way that the two animals attack their opponents. A bull will always heave his horns as high up in the sky as possible in order to appear more threatening. This is why investors call an upward asset price trend (or the rising of the average value) a bullish one. Bears usually keep their head close to the ground and the fall in the average value of a given stock is a bearish tendency. Another popular explanation is that historically middleman merchants that had to sell bearskins they had not yet received from the hunters. The latter would profit from what we would now call a spread – the size of the difference between the cost and sale price.

What Are Stocks & Shares?

Purchasing a stock is like purchasing a small portion of the mother company. Upscale investors who own large percentages of a given mega-corporation do have the right to take part and voice their opinion in crucial decision-making situations. This could change the future of a given conglomerate.

Whenever a firm needs to raise a given monetary amount, it puts its shares for sale. This is also known as an Initial Public Offering (IPO). The value of a single stock is not determined at random, it is calculated on the basis of the stated total company value and the number of shares that will be issued.

Good to Know:

Companies and corporations that are featured on the stock exchange are often regarded as ‘listed’. The ones that are not but still have some value and influence on a given sector are referred to as Over-The-Counter (OTC). Such firms are usually small-scale and the fact that their shares are not currently traded within the stock market does not suggest that they won’t be in the future too.

What Influences The Stock Price?

Stock prices can shift independently from the value of the company that has issued them. This is mainly attributed to the fact that the value of shares is calculated on the basis of the supply-and-demand ratios for it. There is no other sector that is as driven by the public’s attitude towards it than the one at hand.

This means that while the company’s endeavors might be far from being peachy, its shares might still be valued very high. A perfect embodiment of the said is Tesla – the smart car manufacturer. The firm behind the product has yet to make some gains and capitalization but the demand for the good is considerable.

How Does The Stock Market Actually Work?

Every market sector depends entirely on the number of buyers and sellers. They are traders and investors who create all the up and down trends. When the stock price is low, this is mainly because a certain fact drove a large group of people to sell their company shares. Buyers are few and they are not willing to purchase anything at a higher value.

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The opposite situation is also true. Whenever the number of potential buyers equates or exceeds that of the sellers, this means that the price will immediately start to go up. There are a number of different stock trading strategies that can be applied favorably that incorporate both of these principles.

Stock Trading – High Volume & Great Intensity!

The stock market has one of the highest daily volumes among all other financial sectors. Its main task is to regulate the prices of companies so that no mega-corporation can try and take advantage of the regular person by selling them shares at a bigger price than they are actually worth.

Defined by its great intensity, most users would probably be surprised to hear that asset value calculations are rarely done manually nowadays. Everything is mechanized so that the trader is left with more time to analyze price patterns. Investing in the stock market can be very lucrative and financially favorable for anyone.