The stock market is the place where shares of companies are bought and sold. People buy and sell stocks for a variety of reasons. Some want income from dividends, while others look for low-priced stocks they can hold and hope to see grow in value. Still others enjoy having a say in how companies are run, as shareholders get one vote for each share they own.
The most important factor in determining the price of a stock is supply and demand. If lots of investors want to buy a stock, the price goes up, which can entice current shareholders to sell their shares for a profit. If there aren’t enough buyers, the price falls. This is why the stock market is constantly changing: new information is always influencing prices.
To trade stocks, you must have a brokerage account. These can be opened online and are a fairly easy process. When you’re ready to start trading, you can fill out a “market order” with your broker, which is automatically executed at the ask (buy) or bid (sell) price. If you want to try to control the price of your trades, you can use a limit or stop order.
Some of the biggest players in the stock market are institutions like pension funds, insurance companies, mutual and exchange-traded funds, hedge funds and banks. But individual retail investors also participate, often using online brokers. The appeal of the stock market for individuals is that it can offer higher returns than other financial instruments, including debt markets and direct investments in a company’s own shares.
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