What is a stock market & how does share trading work?

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What is a stock market & how does share trading work?

What is a Stock Market?
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Highlights

  • The stock market or share market is a process where publicly listed companies exchange their shares. It allows investors to connect with the public to buy and sell investments.
  • Stocks sell on two market systems -- the primary market and secondary market.
  • The Canadian National Stock Exchange (CSE), Toronto Stock Exchange Venture (TSXV), and the Toronto Stock Exchange (TSX) are the leading exchanges in Canada.

What is the stock market? How does it work? Are you not curious about the stock market and its works? If yes, then this article will provide important information about the stock market.

The stock market or share market is a process where publicly listed companies exchange their shares. It allows investors to connect with the public to buy and sell investments. Buying a company’s shares means buying some part of ownership in that company. If a company earns a profit, then you would also get some profit and if the company faces loss, then you would also get a loss.

Also read: 5 top monthly dividend stocks to buy in Canada

What is a stock/share?

Stocks are equities of publicly listed companies, a percentage of ownership in the organizations that provide their shares to the public. For example, if you purchase a share in Domino’s Pizza (NYSE:DPZ), it means you have acquired some percentage of ownership in that company. Anyone can buy companies’ shares when it becomes public by completing an initial public offering (IPO).

Through different exchanges, shares are traded in the stock market. The Canadian National Stock Exchange (CSE), Toronto Stock Exchange Venture (TSXV), and the Toronto Stock Exchange(TSX) are Canada’s biggest stock exchanges.

Also read: Buying tech stocks? What Canadians should know beforehand

How the stock market works

The stock market is of two types -- the primary market and the secondary market. In the primary market, the companies, for the first time, sell and provide new stocks and bonds to the public after completing an initial public offering (IPO).

This market enables the issuer to directly sells its shares to the investors. Through this activity, the company gets the required capital from public investors. It simply means that a company split itself into various shares and sell its shares parts to the public at a given market rate. In the Secondary market, investors are engaged in buying and selling the already acquired shares.

 different types of stocks

Image credit: © 2022 Kalkine Media®

What are stock exchanges?

It is a place where buyers and sellers trade their financial instruments. It is a centralized location where various financial assets such as bonds and commodities are listed. Stock exchanges connect the government and companies with investors and help in providing liquidity so that enough buyers and sellers can trade effectively and efficiently.

Also read: 5 best TSX value stocks to buy in 2022 

Bottom line

Anyone can buy a stock with the help of brokers and that broker helps in getting the type of stock they want and the various shares they want. They receive the share at the prevailing market price and it is reflected in their account. This is how the stock market works.

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