What is Stock market? how does it work?

Stock markets are the most viable Securities as they come with several monetary benefits. and undoubtedly Investing in stocks is an excellent way to grow wealth. trading in the stock market makes you rich than any other job.apart from this, the stock market helps you to make you wealthy without doing a 9 to 5 job. the stock market is the best way to make money.

but

you need determination, hard work, patience, and discipline. more importantly, you need deep knowledge about the stock market. you need to learn from the basics to the most advanced tools and methods of the stock market. above all, you need to continuously learn and sharpen your skills. In this post, we will discuss the stock market and its working.

Stock market

The stock market is an arrangement, where buying and selling of the equity shares of companies by the participants happens. The participants can be investors and traders. Investors mainly have a long-term horizon in mind and they aim benefits from capital appreciation over the period. Traders earn profits by tapping into small price changes in equity shares. and it mostly lasts for a short period or the whole trading session .there are two types of markets. primary market and secondary market.

also read: How to invest in the stock market?

The primary market

The primary market is the market where companies float shares to the public through an initial public offering (IPO). companies become public for many reasons including raising capital, becoming debt-free, etc.

The secondary market 

The secondary market is the market where investors and traders buy and sell shares they already own. after listing if the stock in the stock market through IPO, They start trading in the secondary market.

Stock exchange

The Stock exchange is a facility for the buying and selling of securities like shares, bonds, and other financial instruments. stock exchanges are the benchmark of the economy of every country. you may hear about global stock exchanges like NYSE, NASDAQ, etc. there are more global exchanges that we will discuss on coming posts. Indian stock exchanges play an important role in the economy of the country. there were a number of stock exchanges in India. as per new regulations, former Indian stock exchanges stopped functioning. currently, NSE and BSE are the major stock exchanges in India.

National Stock Exchange of India Limited (NSE)

The national stock exchange is the leading stock exchange of India, located in Mumbai, Maharashtra. NSE established in 1992 and it is the first dematerialized electronic exchange in the country. NSE is the first stock exchange in India that will provide a modern, fully automated screen-based electronic trading system that offers easy trading facilities to investors.

Bombay Stock Exchange Ltd (BSE)

BSE is an Indian stock exchange located at Dalal Street, Mumbai. it is Established in 1875, importantly it is Asia’s oldest stock exchange. the BSE lists close to 6,000 companies and is one of the largest stock exchanges in the world, along with the New York Stock Exchange (NYSE), Nasdaq, London Stock Exchange, and Shanghai Stock Exchange.

Initial public offering (IPO)

An initial public offering refers to the process of offering shares of a private company to the public. after the listing of the company in the primary market, they will trade in the secondary market where one investor buys shares from another investor. you can apply for the IPO through your broker or you can buy the shares after the listing of the company in the secondary market. The secondary market or the stock exchanges are monitoring by the regulatory authority, the Security and Exchange Board of India (SEBI).

SEBI

Regulation of the Indian securities market is done by The SEBI-Securities and Exchange Board of India. SEBI was established on 12 April 1988 and given Statutory Powers on 30 January 1992 through the SEBI Act, 1992 and it is fully owned by the Government of India

SEBI’s responsibility is to ensure that the securities market in India functions in an orderly manner. furthermore, it is made to protect the interests of investors and traders in the Indian stock market by providing a healthy environment in the securities market.

How does it work?

The concept behind the stock market simple. it operates much like an auction house, the stock market enables buyers and sellers to negotiate prices and make trades. importantly, Companies list shares of their stock on an exchange through a process called an Initial public offering. so Investors purchase those shares, which allows the company to raise money to grow its business. investors can then buy and sell these stocks among themselves, and the exchange tracks the supply and demand of each listed stock.

That supply and demand are the factors that determine the price for each security or the levels at which stock market participants investors and traders are willing to buy or sell. however, other influences such as earnings and the economy might affect the desirability of owning or selling a particular stock.

apart from this, If a company report low earnings, demand for its stock will fade, and as the price will drop, the balance between buyers and sellers will change. so the buyers will demand discounts on the existing price, and many motivated sellers will accommodate them to get rid of the stocks. When more sellers are there than the buyers, it creates more supply than demand, so the price begins to fall.

Buyers offer a “bid,” or the highest amount they’re willing to pay, which is usually lower than the amount sellers “ask” for in exchange. For a trade to happen, a buyer needs to increase his price or a seller needs to decrease his. i know This all may sound complicated, however, in this modern era of fintech, you can make a trade within minutes through your mobile. technology is grown up that much.

How to start invest/trade in stocks?

For investing in the stock market, the first thing you need is a Demat and Trading account under any good broker, in India, there are many advanced brokers are available.you can choose a full-service broker or a discount broker as per your requirement.you can easily open an account online. choose your broker wisely according to your needs because you have to pay annual fees to maintain the account. and these fees depend on various factors including the type of account.

A Stock broker is a person/firm who buys and sells securities on a stock exchange on behalf of clients.

A Demat account is an account to hold financial securities in electronic form. In India, Demat accounts will maintain by depositories. CDSL (central depository services limited) and NSDL (national securities depository limited) are the two depository organizations in India.

A trading account is an investment account that contains securities, cash or other holdings.

In India, for opening a Demat and trading account you must be18-year-old minimum, you must have an AADHAAR card and PAN card issued by the government of India. and importantly you must provide the details of your bank account details. so that after activating your trading and Demat account you can easily send money from your bank account to trading account by internet banking or UPI. you can start trading using that money. brokers provide both desktop and mobile terminals for trading. you can use any of them according to your convenience.

Final thoughts

The stock market is one of the most genuine sources for growing your wealth. by learning and acquiring knowledge, anyone can make money from the stock market. more importantly, make sure you are continuously updating your stock market knowledge and skills. investing in the stock market is the most common and genuine method to make money. in this modern era of financial technology, you can buy and sell the share of the company you want within seconds through your broker’s mobile app. in this post I tried to explain the basics of the stock market. i hope it will you to learn about stock market basics. and will discuss more on the coming posts.

happy investing