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What is the Stock Market and how does it operate?



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The Stock market is a common market place where people who wish to trade shares of publicly listed companies.


A company that wishes to be publicly traded must get the prerequisite registration and operational requirements to be publicly listed. Once publicly listed, the company then lists its shares on the stock exchange market.


The stock market, therefore, is the place where traders buy and or sell the listed company shares; a concept commonly referred to as stock trading. NASDAQ and NYSE are America's most popular and the largest stock markets so far with market capitalizations at 11 trillion and 31 trillion US dollars respectively.

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It a financial tool which connects buyers and sellers. The stock market serves as a means for companies to secure funding by offering ownership stakes (shares) to investors, who, in turn, have the freedom to purchase or sell these shares according to their preferences. 

It's working

1. The stock market operates through a company's initial public offering (IPO), where shares are offered to the public at an initial price.

2. Once available, shares are traded on stock exchanges like NYSE and Nasdaq, and investors can buy or sell through licensed brokerage firms.

3. Investors place orders to buy or sell shares at specific prices, either through "market orders" or "limit orders."

4. Stock prices are influenced by supply and demand; more demand leads to price increases, while more supply can lead to decreases.

5. The stock market involves various participants, such as retail and institutional investors, market makers, and high-frequency traders.

6. Market indices like S&P 500, DJIA, and Nasdaq Composite track overall market performance and specific sectors.

7. Investing in stocks carries inherent risks due to fluctuating prices influenced by economic conditions and other factors. Regulations ensure fairness and transparency in the markets.

8. Investors can choose between long-term investment for potential growth and dividends or engage in active trading for short-term profits.


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