A stock market is a marketplace where publicly traded company stocks and other securities are bought and sold. It is a platform where investors can buy and sell shares of publicly traded companies. The stock market is also known as the equity market. When investors buy shares of a company, they become part owners of that company and are entitled to a share of the company’s profits or losses.
The stock market is often used as a barometer of a country’s economic health, as well as a way for companies to raise capital.
How Stock Market Works
When you purchase a public company’s stock/share, you are purchasing a small piece or ownership of that company.
- Companies go public: A company can choose to go public by issuing shares of stock through an Initial Public Offering (IPO). This allows the company to raise capital by selling shares to the public.
- Investors buy and sell shares: Once a company’s shares are publicly traded, investors can buy and sell those shares on a stock exchange. This is done through a broker, who acts as an intermediary between the buyer and seller.
- Trading based on supply and demand: The price of a stock is determined by the laws of supply and demand. When more people want to buy a stock than sell it, the price goes up. When more people want to sell a stock than buy it, the price goes down.
- Diversification: The stock market allows investors to diversify their portfolios by purchasing shares of many different companies in different industries, this way an investor can spread the risk of investing in a single company across multiple companies and industries.
- Regulations: Stock markets are regulated by government bodies, such as the Securities and Exchange Commission (SEC) in the United States. These regulatory bodies ensure that the markets are fair and transparent, and that companies and investors are protected from fraud and manipulation.
Biggest Stock Exchange In The World By Economy
- NYSE (USA)
- NASDAQ (USA)
- Shanghai Stock Exchange (China)
- Hong Kong Exchange
- Japan Exchange Group
- Shenzhen Stock Exchange (China)
- Euronext (Europe)
- London Stock Exchange
- National Stock Exchange of India
Biggest And Most Powerful Stock Market Crashes In History
When there is significant decline in stock prices or the index across the globe then that situation called is a “crash”.
1929 Stock Market Crash
Before the crash, which wiped out both corporate and individual person wealth, the stock market peaked on Sept-3, 1929, with the Dow at 381.17. The ultimate bottom was reached on July 8, 1932, where the Dow stood at 41.22. From peak to trough, the Dow experienced a staggering loss of 89.2%
Black Monday 1987
Monday 19 October 1987, the Dow Jones Industrial Average plunged by nearly 22%. Marks the biggest single-day decline in stock market history. By the start of November, 1987, most of the major stock market indexes had lost more than 20% of their value. This crash mostly happened because at that time computer trading or automatic trading has started and when the market goes up computer buy more and when it goes down it will sell more.
Dot com Bubble
This is the most famous one and may be everyone aware of this crash. The primary cause for this crash was overvalued internet or digital stocks. Everyone thought that this dot.com companies will give huge return at some point so everyone invested a lot and increased their values even when they are making zero profits.
This is the most unexpected fall and created the history in the human kind, As we are all aware that every country affected by this virus and all over the world various restriction and lockdowns imposed and due to this all the economy shatters to the ground.
2 thoughts on “How Stock Market Operate : Fundamentals Of Stock Market”
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