A stock market is a network of trading activities where shares and other securities are bought and sold, protected by laws against fraud. It’s a key part of modern economies and helps people grow their wealth over time, potentially helping them fend off rising prices that would eat into the buying power of their money.
Companies raise money by offering shares of their stock, called equities, in order to grow their business and expand into new markets. These companies list their shares on one or more stock exchanges, such as the New York Stock Exchange and Nasdaq. Once listed, the stocks can be traded among investors, who buy or sell them for their own account through a brokerage firm. Each trade is based on the demand for a stock or security, and the supply of shares in the marketplace, which creates the price of a share.
Investors buy or sell a stock with the hope that its price will rise to the point where they can sell it for a profit. This price movement is caused by many factors, some fundamental and some technical. The former include the company’s revenue, profit margin and the goods or services it offers. The latter involve trends in the market and technical analyses of a stock’s past performance.
Investors come in all shapes and sizes, from institutions like pension funds or mutual fund managers, to individual retail investors who use popular online broker platforms to manage their own accounts. There are also a number of special trading tools, such as short selling, margin buying and derivatives that can help people control larger blocks of stocks for a smaller amount of money than they might otherwise have been able to purchase or sell at.