Depending on monthly salary alone is not sufficient to fulfil dreams. It has become necessary for every person to find ways to earn additional income. Saving money is essential. It would be difficult to lead a happy life after retirement by depending on annual salary alone. Of the different paths available for a person, investing the right amount in stocks is a healthy option. However, there is a necessity to understand about the working procedure of the stock market.
A stock market is a public entity. Economic transactions occur at this place. It is a platform where stocks and derivatives of a company are available for trading. Every stock has a specific price set by the company. $36.6 trillion dollars is the world’s stock market value. Possible investors buy or sell stocks or derivatives of a company. A stock exchange is a formation of mutual corporations or entities of corporations. It specializes in bringing both a buyer and a seller onto a single venue.
Stock market platform is an open market. It includes individual investors to large hedge fund traders. A professional working in the stock exchange notes down the request and performs the necessary action of buying and selling. Transactions are also carried out physically in a stock market. This is referred to as public outcry. Under this procedure, a trader enters the participation of the auction by placing a verbal bid. However, availability of computer and internet changed the entire scenario. Trading is now carried out electronically. The internet connects numerous traders from different parts of the globe. Virtual trading is easy in comparison to physical trading. It eliminates the need to visit a stock exchange physically. Moreover, with complete information available on the internet, it becomes easy for a trader to buy or sell stocks at the right time.
Trading takes place when the ask price and the sell price coincide. This is a first-come-first-served procedure due to multiple bidders in the market. A stock exchange plays a vital role in exchanging securities of a company. It is important for a company to list their stocks with the exchange. Selling securities or derivatives helps a company raise capital. Any business can sell a specific percentage of ownership in the public market to raise capital. An economy where the stock market is rising is considered as an up-coming economy.
The central bank watches the entire trading procedure. This is essential for smooth flow of financial system within a country. It also regulates the pricing of a stock, as most companies increase it for financial benefits. Share prices have a direct effect on household wealth. A stock exchange acts as a protector and as a mediator to a buyer. This reduces risk and helps an individual investor to avoid counterfeit actions. A smooth functionality in a stock exchange drives economic growth. Companies have an opportunity to expand, create employment and increase production. All these factors contribute to the economic development of a country and its prosperity.