US Stock Market – How the Stock Market Works

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Have you ever heard of the expressions "the stock market has collapsed" or "the stock market is at an all time high"? But what exactly is the market and how does it work? In order to understand the basics of the stock market, one must first understand the meaning of the word stock. Stocks can simply be defined as the property of a company which results in a future inflow of cash in terms of dividends and capital gains from the organization. A simple certificate gives a person partial ownership of the business. However, the extent of the rights that can be exercised on the property of the company depends on the type of stock purchased. The question now is how to get the stock?

This is where the securities market comes in. The market is a physical / virtual place where the shares of public limited companies are bought and sold daily. Brokers representing different companies are present on the market and exchange shares in the companies on a continuous basis. The market provides companies with a means of raising capital in the form of equity, whereby an outflow of capital would give shareholders certain rights over the assets of the organization. The most popular exchanges in the world are the London Stock Exchange of the United Kingdom, the New York Stock Exchange and the NASDAQ. The forces of supply and demand are known to wreak havoc in the functioning of the stock market and these market forces are responsible for stock market crashes and booms. The stock market is also subject to a lot of speculation from investors, which causes stock prices to fluctuate sharply. The stock market is known as the secondary market through which shares of companies are already traded that have already been issued without the participation of the company itself. The market can be a physical location or the transactions can take place in a virtual world.

The stock market is therefore a medium that allows buyers and sellers to interact daily to buy and sell stocks of large companies. Buyers and sellers are generally interested in capital gains from price fluctuations, with stocks generally being bought when prices are low and sold later when prices rise. However, the market is also aimed at investors who wish to make long-term investments in order to benefit from dividends and capital gains.

The stock market is mainly managed by brokers who charge commissions based on the service provided. The broker can be a full-time broker or a discount broker and charge a service fee depending on the work performed. For example, a discount broker charges a lower fee than a full-time broker because the discount broker is only involved in equity transactions, while a full-time broker participates in equity transactions and provides sound financial advice.

As you can see, the market is no different from a fruit market. It is a place where you can go to exchange capital for an item. In this case, you are exchanging money for a real business instead of fruit.


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