Stock Market for Dummies
In business news we often hear about stock market going up or down. But how does the stock market work? In order to properly answer the question how does the stock market work, it's essential to explain what is the stock market and why it's important. When people hear words stock market, most of them visualize wall street and everything what belongs to it. Some people also imagine famous stories about people making it big on the stock market. Simply said, the stock market is a huge crowd of people willing to trade with stocks. In order to work, in the stock market there must be market participants willing to trade. Buyers stand for demand and sellers stand for supply. The price of any stock is determined by relationship between supply and demand, by market participants willing to purchase or sell at a certain price. If demand exceeds supply, price should rise. If supply exceeds demand, mostly price goes down. This economic principle applies to every market. Buyers are buying because they suppose that prices will rise. Sellers are selling because they suppose that prices will go down. Each price is a consensus of value of all market participants. There is a lot of aspects that influence price movement and their weight is relative because only buyers and sellers know why they bought or sold any given stock. Between these factors belongs news about company, industry or the whole economy. If good news comes out on a company, the price and demand for the stock mostly go up. When bad news occurs, the price and demand mostly drop. Next factor is information about company's performance like sales growth, earnings, production and so on, next element is the market psychology, what is topic itself, and generally there is countless amount of other parameters that influence decisions of market participants. And why companies offer their shares to the public? The most important reason is to raise money. When company offers their shares through the stock exchange via IPO, what stands for Initial Public Offering, company can obtain more capital by selling its shares. However it has some negative characteristics. For example, company has some new accounting tasks and must make frequently some public reports about company. On the present these stock trades are very organized and performed electronically by computers in stock exchanges like New York Stock Exchange (NYSE). Barriers for entrance into the stock market for common people are relatively low and stock trading is becoming still more popular. If you want to learn more about the stock market and how to profit from it, then check out Stock Market Trading Home Study Course.