• The Stock Markets

How does the stock market operate?

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• Mar 29 2024

What is the stock market?

the stock market provides a platform for companies to raise capital and for investors to buy and sell shares, allowing individuals and institutions to participate in the ownership and growth of businesses.

People who are part of a stock market can trade in any publicly traded company, as long as other people on the market have the opposite view. After all, a market is made up of people with different points of view.

Take XYZ as an example of what's going on right now. XYZ was having trouble with management succession, and most of the company's top leaders were quitting. The lack of leadership is hurting the company's image a lot. The price of the stock went down from Rs.4,500 to Rs.4,000 because of this.

Say there are two traders, let's call them A and B.

What A thinks about XYZ – Because it will be hard for the company to find a new CEO, the stock price is expected to drop even more. Based on his view, A should sell XYZ stock if he wants to trade. But B has a different point of view and sees the same thing in a different way. She says that XYZ's stock price has gone up too much because of the succession problem, and that the company will soon find a great leader. The price of the stock will go up in the end.

Based on her point of view, B should buy XYZ stock if she deals.A will sell something in XYZ for Rs.4000, and B will buy something.

Now, A and B will each go to their own stock broker and place an order to sell and buy the stocks. He or she sends it to the stock exchange. The stock market has to make sure that these two orders are matched so that the trade can happen. This is the main job of the stock market: to make it easy for people to buy and sell stocks.