The Stock Market: Basics

Sep 11 2009

By SD

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)