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The Stock Market

The stock market is essentially the term given to the place
where traders and investors can buy and sell stocks through
agents known as brokers. This takes place in a very similar
fashion to that of a cattle market or any other livestock market for
that matter, in that prices vary on a constant basis according to
supply and demand.

As more people want to buy a stock and less people are willing to sell it, the price rises until more sellers are tempted by the higher prices on offer and the relationship returns to a state of equilibrium. Equally, if the circumstances change and the stock loses favour with investors, causing the rate of selling to increase and buying to decrease, then prices will drop until they reach a level which entices investors back into the stock because they feel it is now good value for money. We will show some of the ways you can determine how fairly valued a stock is later, though this is often described as more of an art than a science.

The Stock Exchanges

The places where stocks and other securities such as options and
futures are traded is known as an exchange. There may only
be a single exchange making up the stock market for a country,
or in some cases there may be numerous exchanges within one domestic
market. For example, in the US there are three main exchanges:

• The American Stock Exchange (AMEX)
• The New York Stock Exchange (NYSE); and
• The National Association of Securities Dealers Automated Quotes
  (NASDAQ).

There are also a number of regional exchanges including the Chicago
Stock Exchange (CHX) and the Pacific Stock Exchange (PSE) in addition
to the three main exchanges above.

Some major exchanges in other worldwide markets include:

Australia

The Australian Securities Exchange
(ASX)

Great Britain

The London Stock Exchange
(GBX)

India

The National Stock Exchange of
India (NSE)

The Bombay Stock Exchange (BSE)

China

Hong Kong Stock Exchange (SEHK)

Shanghai Stock Exchange (SSE)