There’s a very popular saying in Wall Street that Everyone has the brainpower to follow the stock market.If you made it through fifth-grade math, you can do it.
So, let’s see how fruitfully I can make you understand this simple math of trading.But before going into the calculations let’s understand what actually the word stock market means.
What is Stock Market?
A stock market is a place where publicly listed companies are traded.It’s just like any other market where buyers and sellers meet to trade different goods.In the stock market, the good is none other than the stock.
It is that place where publicly listed companies sell their shares to the public to earn money so that they can expand their business and at the same time the investors or the people buying the stocks become a part owner of the company, they gain ownership.
The stock market is a complicated system where shares or stocks are issued, bought and sold. It becomes a place where all the financial instruments that are mentioned can be traded, like stocks, mutual funds, and other schemes.
The introduction of the stock exchange has made the system centralized and with digitalisation and with the help of brokers any investor irrespective of his location can execute an order and book his ownership.
It is also called equity market. It becomes a free market economy where all the economic incidents are absorbed and represented through price fluctuations.
As there exists a variety of shares with different features, these shares need to be incorporated in a system to simplify their execution.
The stock market is categorized into two types, one is Primary Market and the other is Secondary Market. Without going into the details I will just make it very simple what these two markets are all about.
The market where a company sells the share to the public for the first time in initial public offering(IPO) is called as the Primary Market.This is the only place from where the company earns money.After this, the series of buying and selling of shares happens in Secondary Market.
The secondary market is that market where one investor buys shares from another investor at the market price or whatever price both of them agrees upon.It is that market where the buyer and the seller meets and trade stocks, here both individual and institutional investor takes part.
The secondary market or the exchange is regulated by the regulatory body.In India, it is SEBI (Security and Exchange Board of India)
The stock brokers help their clients or the investors to get in touch with the exchange.You being an investor can buy or sell your stock in the exchange with the help of your stock brokers.India’s premier stock exchanges are Bombay Stock Exchange(BSE) and National Stock Exchange(NSE).
To know more about the functioning of the exchanges click on How stock market works.