How Does The Stock Market Work?

A stock market, equity index, or share index is an establishment where the shares of a company are sold to the general public. These types of exchanges can be found in several different countries throughout the world. In Canada, for example, there is Toronto Stock Exchange. This article discusses the details of how such exchanges function and what an investor should know when considering this type of investment.

STOCK MARKET: The term “stock market” can be used to refer to either a group of companies or the actual stocks of those companies. Stocks are issued by companies to be sold to buyers. These shares are usually purchased from a broker or other buyer who represents the sellers. Investors can buy shares from the entire market or from a particular company.

STONEY LAKES: This is a broad term that includes any stocks not traded on the New York Stock Exchange. Stocks that are listed on NASDAQ and OTCBB are not considered part of the stock market capitalization. One of the largest stock exchanges is NYSE and it oversees about 24 million shares of the largest publicly traded companies. This means that the entire market cap is about $5.5 trillion.

DOW JONES: An individual stock is one that has been listed on the New York Stock Exchange but is not traded on its own. This can be as large or as small as an item that is bought or sold on the Internet. There are many investors who are unfamiliar with the Dow and its many names. A Dow Jones Index is simply a number that is used by many investors to identify the movements of individual stocks. This index is based on the performance of the company named after its current stock price.

STONEY BAGS: Stocks that fall into the money market category are known as money stocks. As their name implies, they are bought and sold on the stock market. They follow the same rules as the standard Dow and the New York Stock Exchange but are purchased in large quantities and held for awhile. Money stocks generally have low volatility and tend to appreciate in value slower than other stocks. There are about a dozen stocks that fall into this category. Names include MICR, UPI, EQC, GTC and more.

So, what does this all mean for us as investors? It means that we can trade anytime with any of these terms, and we can profit from any of them. This is how the stock market works. Just know your terminology!