What Is the Stock Market: Stock Market Definition, Primary and Secondary Stock Market, How Does Stock Market Work, Functions of the Stock Market, Participants of the Stock Market, Importance of Stock Market, Understanding the Basics of Stock Market, How do you Make Money from Stock, Conclusion
In very common terms, Stock Maret is a place or venue, Where investors buy or sell shares of the public company stocks, It means investors buy the ownership in terms of shares in a public company.
Stock Market provides the facilities of listing companies first time on the stock market through Initial Public Offering ( IPO), With the launch of a company IPO, it becomes a public sector company.
Stock Market Definition
Basically, Stock Market is a complete system or place, Where securities of publicly listed companies are traded.
In the primary market, companies issue shares for the first time to the general public through an Initial Public Offering (IPO) to raise capital.
Whereas in the secondary market, When once the shares or securities have been sold in the primary market.
They are traded in the secondary market by the investor, where one investor buys or sells shares from another at the market price or negotiates the price to which both buyer and seller agree.
>> Learn more about How to Invest In Stocks?
The stock exchange is the place or a system within the stock market where securities are bought and sold between investors at their agreed price.
The stock exchange manages all the transactions of brokerage firms along with the individual.
Understanding the Basics of Stock Market
A newbie trader makes a lot of mistakes in the stock market, to understand the basic concepts of the stock market learn to newbie traders where they are making mistakes and book the loss.
A newbie can avoid these minor silly mistakes to learn and understand the basic terms and concepts of the stock market.
A stock market is a place where every trader needs to learn and updating own self even if he/she is an expert in trading because situations in the market change every second so learning is a very important part of the stock market.
» Ready to learn more? Read our detailed tutorial on Understanding the Stock Market Basics for more detail.
Click on the above link and you will get details about the terms and basic concepts of the stock market, in this article our team describes the stock market in very simple words.
you should go through this article if you are a newbie in the stock market.
Stock Market: Primary and Secondary
As the aspect of functions of the stock market, both the primary market and secondary market have their important roles.
In the primary market, companies sell their securities directly to the investor instead in the secondary market, securities are bought and sold between investors at their agreed price.
Primary Market
Basically, Primary Market is a source of securities like stocks and bonds.
Companies go public first time through an initial public offering (IPO) to raise money to ensure the company’s growth and other important tasks like repaying the debt etc.
>> To read more about: What is Primary Market?
In the primary market, companies first time sell the securities to the public through IPO, by the IPO investor can buy the share of a company directly through the issuer.
Secondary Market
The secondary market provides an interface where investors trade the securities in the stock market and in a practical way the secondary market is the real stock market.
>> To read more about: What Is A Secondary Market?
In the secondary market, investors buy and sell stock from one another without issuer interference.
For buying stocks, bonds secondary market refers to the real stock market like National Stock Exchange (NSE), New York Stock Exchange (NYSE).
Participants of the Stock Market
The stock market is a complete system and every system has its sub-system or unit.
In the case of the stock market, we can categorize the stock market participants into companies, individual investors and traders, stockbrokers, stock exchanges, financial intermediaries and regulators.
>> To read more to understand the role of each participant in the stock market: Who are market participants?
To Understanding The Stock Market system and How does stock market works? It’s important to know the role and functions of each participant in the stock market.
How Does Stock Market Work
The stock market works as a completely automatic system, automatic in the sense investor now have no need to visit the stock exchange.
They can simply do research or buy and sell the stock from their homes using mobile apps and web-based applications.
There are two main basic functionalities of the stock market. One is companies offer newly issued shares and financial products to investors. Second investors offer their financial instruments like shares to other investors.
Today’s stock markets allow real-time trading which is fulfilled within seconds.
Order book determined the price of financial instruments, orders placed as soon as buy or sell orders matched and trades executed automatically.
Functions of The Stock Market
There are some functions performed by the stock market.
- Safety of Transaction: The stock exchange is well regulated for all the participants associated with it. The stock exchange system ensures the safety of transactions. The Securities and Exchange Commission (SEC) is a U.S. government agency that regulates the securities markets and protect investors.
- Providing liquidity and Marketability to Existing Securities: The stock exchange provides a platform where buyers and sellers continuously bought and sold securities.
- Pricing of Securities: According to demand and supply, The stock exchange allows the value of the securities which provides instant data to both buyers and sellers. Instant data also helps in the pricing of securities.
- Spreading of Equity Culture: The stock exchanges have extensive information on the listed companies, which is further available to the public. This data helps in educating the public about investments in securities.
- Contributes to Economic Growth: Investors have an opportunity to buy and sell shares, in the stock market savings turn into the most productive investment which leads to capital formation and economic growth.
Importance of Stock Market
The stock market is a platform for companies to raise money by offering stock shares and corporate bonds, for investors to buy and sell shares.
Companies raise money by listing on the stock exchange so they can enhance their business or invest money in the growth of the company.
Investors buy and sell shares of the company because they want to make profits through capital gain as the company grows or earns profit the share value of the company also increases.
How Do You Make Money From Stock
There are some very basic rules in the stock market which you have strictly follow that will help you to make money in the stock market.
- Buy and Hold shares: In long-term investments in good companies mostly stock prices always go up. So try to invest money in the long term.
- Before investing in any stock do complete market research, Technical, fundamental and financial analysis.
- Be Patience: As we know the stock market is very versatile, Patience is a virtue for good investors in the stock market.
- Good Strategy: Good strategy is very important in the stock market first apply your strategy with a small amount and when you will confident enough about your strategy then invest more money.
- Be always in learning mode: Things are changing very rapidly as technology enhances, so always be ready to learn new things.
- Observe and React: Observe the market very carefully and learn from real situations than if you will got the opportunity grab it.
Conclusion
The stock market is a plateform that provide an opportunity to individual invest money in stock after doing fundamental and techanical analysis so they can do better decision about it.
Stock market is a complete system that provide wide information about compnies which helps investors to predict company financial and future growth.
