Stock market is like a market place for businessmen. In a public market, goods are sold to the public. In a stock market however, stocks are sold to the public. Company stocks are sold in the form of shares. The more shares a person buys in a company, the higher his or her stocks are for that particular company.
The stock market consists of the primary market and the secondary market. Primary market is where companies raise finances for their operating expenses by selling shares to investors. The secondary are investors who buy and sell those shares to other investors. Their decisions are constantly based on changing market conditions.
A stock market is like an auction house. It is a systematic method of buying and selling. In a stock market though, it is a common sight to see people shouting and gesturing at one another.
The buying and selling of stocks begins in different places. If a person decides to purchase stocks in a particular company, a broker is contacted. This broker in turn takes the money of the investor and coordinates with a floor broker at the stock exchange. Usually a floor broker works for the broker or with the company selling the stocks.
At the stock exchange, floor brokers purchase the stock that the investor wants. When a deal is consummated, it is made known to a broker and the investor becomes a stockholder of the company.
That investor may decide to sell the stock. This is usually done when the price per share has gone up. This entails profit for the investor. For example, if a person bought 100 shares at $20.00 per share and the price increased to $25.00, selling those 100 shares results in $500.00 profit.
The economic principle of supply and demand is the driving force of the stock market. The number of shares of stocks that are open to the public dictates the supply and the number of shares that investors want affects the demand.
Movement of stocks in a certain market causes the constant changes in the prices of stocks.
For example, if most people believe that the economy is growing, they would buy more stocks. But if the economy is in a downfall, their tendency is to sell their stocks.
Many businessmen choose to make a long term investment in the stock market. There are instances where stocks decrease in value causing a stockholder to lose money. The stock market does not guarantee profit. The better a person is in reacting to the changes at the stock exchange; the better his chances are for profit.
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