How Does The Stock Market Work

How Does The Stock Market Work?
Before you start investing in the stock market it is a good idea to ask yourself, "How does the stock market work?" The answer to this question is simple. Companiesgo public by offering a specific number of shares in their company to the public through the stock exchange. Investors then can use the stock exchange to buy and sell stocks of companies that they areinterested in. While this basic description of how the stock market works is adequate enough to understand what the stock market is, to get a better understanding of how it actually works it will beimportant to learn about some of the terms that are commonly used when discussing the stock exchange including stock prices and market capitalization.
The first term that you may hear when you startlearning about how the stock market works is stock prices. Stock prices are the price that a specific stock sells for. This price is set by several market factors including the health of the economy,trading trends, spending trends, and financial or technical reports put out by a company or an independent third party. The next term that you may hear about is market capitalization. Marketcapitalization is the value of the company or the stock that is being offered. To calculate the market capitalization of a company, or stock, simply use this formula: The number of outstanding shares X theprice of the stock market capitalization of the company.
After you learn about the basics features of the stock exchange you will next need to learn how to buy and sell shares. To buy a stock you willneed to establish some kind of investment account. In most cases you will open an investment account with a stock broker that works at a local firm. However, today you can also open an onlineinvestment account and make trades without the help of a stock broker. After you have set up your account you will need to fund it before you can make a purchase. Once your account is funded you will be...