What is a stock market? How does the stock market works? - GovtVacancy.Net

What is a stock market? How does the stock market works? - GovtVacancy.Net
Posted on 22-10-2022

How does the stock market works?

Every day millions of people open accounts to trade in the stock market, but many of them do not reach the goal of multiplying their money. People are drawn to the opportunity to make money in the stock market, but not everyone knows how to do it. Let's talk about how the stock market operates.

What is a stock market?

stock exchange is an online platform where you can trade securities: stocks, bonds, investment units, and more complex instruments such as options and futures.

The exchange makes sure that all parties fulfill their obligations and transactions are carried out quickly and reliably. Only trading in securities of trustworthy companies is allowed; you won't find any obvious scammers there. And since there are many sellers and buyers on the exchange, transactions are made at a fair market price.

professional intermediary

To enter the exchange, you will need a professional intermediary - a broker or trustee. Brokers transact on your behalf. At the same time, you yourself decide which securities to buy, sell and when to do so.

It is possible to buy and sell certain types of securities without going through the stock exchange, this form of trading is called over-the-counter. The organizers of such transactions are usually the same brokers and trustees. But over-the-counter trading is associated with higher risks: the value of securities is often far from market value.

Where do the values ​​come from?

They are issued by issuers (companies, the state, or their individual regions) to attract financing. Issuers often simply want to borrow money from investors at interest, and to do this they issue bonds, in effect, notes.

Where are the values ​​held?

Today, all the stocks and bonds that are traded on the stock exchanges are not documentary: they only exist in the form of digital codes. When an issuer issues securities, the registrar creates a register of shareholders or bondholders of the company on its server and updates it. This registry stores information about who owns and how many securities.

Such records help issuers communicate important news to security holders (for example, the dates of general shareholders' meetings), and accumulate stock dividends and bond coupons.

The creators of the company can keep a part of the shares or bonds and continue to keep them in the registrar. But exchange trading is only possible through a system of escrows that record information about all transactions on exchanges. This system includes the country's central deposit, exchange deposits, as well as deposits from all brokers and trustees.

Who controls the order in the stock market and the stock market?

This is done by the regulator, a state organization that supervises the work of all professional participants in the stock market: brokers and managers, as well as registrars, depositaries, and exchanges. In general, the Central Bank of each country issues these functions. It also issues special licenses to all professional market participants.

I want to trade on the stock market. Where to start?

It is important to remember that investments in securities can always generate losses. Therefore, it is worth becoming an investor only if you have free funds and are ready to risk them.

Buying and selling securities is not a casino or a lottery, but a scrupulous calculation. How not to get burned and choose the safest behavior strategy on the stock market. 

Thank You