After, IPO(initial public offering), a company can issue its shares to the public and trade them in the stock market. A stock market is a place where sellers and buyers meet and decide a price for that specific trade.
Stock markets are generally considered as secondary markets, where the existing owners can transact their shares with the potential buyers. Stocks also called as equities describe as a fractional ownership in the company. The person who is holding those stocks is called as shareholders.
An actively working stock market is considered crucial to economic development, as it gives the ability to instantly access funds from the public.
The prices of these shares can be fixed in numerous ways, but the most common way is to set through an auction process. Over here the buyers and sellers of the shares place the bids and offer to buy or sell. A bid is something where someone wishes to buy and offer or ask is the price where someone wishes to sell. When this coincides with each other the trade happens.
How stocks are traded in the market
Stock exchanges mainly provide the marketplace by facilitating the selling and buying of stocks among various investors. Governmental bodies like SEC (securities and exchange commission)in the united states, generally regulate these stock exchanges. These commisions oversees the market to protect investors from the frauds occurring due to financial elements and make the exchange market run smoothly. How so ever, most of the stocks are traded on the trading floor or over-the-counter, some stocks are brought electronically.
OTC stocks do not need any minimum requirements to get listed on stock exchanges. OTC stocks are not subjected to any regulations as compared to the stocks listed on the exchanges. So it is not an easy way to get reliable information about the companies which are issuing stocks.
Stocks on the over-the-counter are typically thin-traded than the exchange-traded stocks., where the investors deal with wide spreads between ask and bid prices for an OTC market. In opposition, Exchange-Traded stocks are more liquid, for small bid and ask spreads.
Bull and Bear Markets
In stock trading, Bull and bear markets are often used interchangeably. A bull market is a financial condition where the prices of the group of securities are rising are expected to rise. This is mainly used in stock marketing but is often used to refer to the trading elements such as real estate, bonds, currencies and commodities. Bull markets generally last for months and extended even to years.In contrast to a bull, there is a bear market, which is regarded with falling of prices and is typically a pessimist. The bear market is concerned with the rise in the stock market. It is the market which shows the lack of confidence. prices fluctuate with the same prices and then comes down. Volumes are stagnant and indices are fallen too.
Important stock exchanges
There are many major stock trading exchanges, wherein securities are listed and exchanged. There are at least 19 exchanges where the market capitalization has crossed the US $ 1 trillion. These stock market exchanges account for 87% of Market capitalization globally. Some of the major exchanges include new york stock exchange, Nasdaq, London stock exchange, Japan exchange group, etc.
The Stock market is buying and selling of stocks, where the main idea is to Buy Low and Sell High. This will generate a profit. To make money investors buy stocks when the prices are low in a bear market and when the prices rise they will sell the stocks in the bull market. To avoid the hassles and risks arising from the stock market, it is safe to buy the stocks and invest in them regularly by making fixed size Investments and holding those investments for a longer duration.