How Does the Stock Market Exchange Work?

A stock market, stock exchange, or bond market is an establishment where shares of stock are sold to the public. The term ‘stock’ refers to a particular entity, such as a company or a government. The word ‘share’ in the stock market denotes a fraction of one percent of a whole corporation’s issued stock. The term ‘market’ applies to any association, in which the prices of securities are negotiated for a known market value at any given time. These may comprise publicly traded securities listed in a stock exchange.

There are different kinds of STocks available in the stock market. It can be divided into financial STocks and non-financial STocks. Financial STocks includes treasury bills and bonds, common stocks issued by publicly traded corporations and mutual funds, etc. Non-financial STocks include stocks not traded on the stock exchanges, i.e.

The stock market has four major categories – Buyers, Sellers, Market makers and Brokers. Buyers are the individuals or establishments buying the securities and selling them to other buyers at a pre-determined price. The seller is also an individual or institution who sells securities for a pre-determined price. The third category of participants is the market maker or broker, who executes the orders of the buyers and ensures that the volume of sale is controlled.

The main purpose of the buying and selling of shares is to increase the value of the shareholder. This involves the spread between the buyers and sellers of the shares. Usually, when the buyers sell their shares, they have to pay a spread to the sellers.

In the stock markets, there is a bid-ask spread. This is the difference between the buying and selling prices of the same share. The bid-ask spread is a factor that influences the buyers and the sellers. The more the spread, the lower is the price of the share. However, it is quite impossible to predict the bid-ask spread.

The major components of the stock markets include the following: Major Shareholders, Stocks, Minicourses, Dealers, and Participants. These components affect the nature of the transactions in the markets. The major shareholders are the entities or persons involved in the business who participate in the purchasing of shares. The stocks are the actual physical shares in the company. Minicourses refer to the dealers involved in buying and selling the stocks.

The main trading operators in the stock market exchange are the dealers. They buy and sell shares and carry out the transactions between the buyers and the sellers. The participation of the participants is essential for the smooth functioning of the stock market exchanges. The dealers are known as the public companies.

The major participants in the stock exchange are the retail traders i.e. individual investors, institutional traders, and corporate groups. There are many different types of trading. Although trading involves only a small number of trades, it is essential to understand the risks involved in trading before participating in the market. There are also many different types of shares.