Companies Go Public: Companies decide to go public by offering shares of their company to the public through an initial public offering (IPO). This is the process by which a private company becomes publicly traded.
Buying and Selling: Investors buy and sell shares of publicly traded companies through stock exchanges, which act as marketplaces for trading. Examples include the New York Stock Exchange (NYSE) and the Nasdaq.
Supply and Demand: The stock market operates on the principles of supply and demand. When there is high demand for a stock, its price tends to rise, and when there is low demand, the price tends to fall.
Bid and Ask Prices: Each stock has a bid price and an ask price. The bid price is the highest price that buyers are willing to pay for a stock, while the ask price is the lowest price that sellers are willing to accept.
Market Orders and Limit Orders: Investors can place market orders or limit orders. A market order instructs the broker to buy or sell a stock at the prevailing market price, while a limit order sets a specific price at which the investor is willing to buy or sell.
Market Makers: Market makers are entities, typically brokerage firms, that facilitate the trading of stocks by providing liquidity to the market. They continuously quote bid and ask prices for a stock and help ensure there is a market for buyers and sellers.
Price Fluctuations: Stock prices can fluctuate due to various factors, including company performance, economic indicators, news events, investor sentiment, and market trends. These fluctuations can result in gains or losses for investors.
Fundamental and Technical Analysis: Investors use various methods to evaluate stocks. Fundamental analysis involves examining a company's financial health, earnings, growth potential, and industry trends. Technical analysis focuses on patterns and trends in stock price and trading volume to predict future price movements.
Long-Term Investing and Trading: Investors have different strategies. Some investors take a long-term approach, aiming to hold stocks for an extended period, potentially benefiting from dividends and capital appreciation. Others engage in short-term trading, seeking to profit from short-term price fluctuations.