Stock Market Beginners Guide

This stock market beginners guide is a basic knowledge of stock market and it’s working. You will get all stock market basics knowledge from this post.


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What Is A Stock?

A stock is a security – like a share of ownership in a company. When you buy shares in a company, you’re buying part of the company. You can make money if the company’s value goes up or if you sell your shares to someone else.

How Do I Buy Stocks?

You can purchase stocks through an online broker, at an investment bank, or at an online trading platform. You may also be able to buy them directly from the issuing company.

What Is Stock Market?

The stock market is a place where stocks are traded. A stock is a type of security that represents ownership in a company. The prices of stocks fluctuate based on supply and demand, and the price can go up or down.

A stock market is a public market for trading stocks, bonds, and other securities. It may also refer to the entire financial system, including all markets for capital or financial assets such as currency, savings accounts, loans etc.

Simply put, the stock market is where stocks are traded. It may serve as a term that refers to either markets or exchanges, but when most people say “stock market” they refer to one of the two. In general, these two words are interchangeable.

The laws of supply and demand affect prices in both markets and exchanges for all goods, but in different ways based on their scope and niche.

The New York Stock Exchange (NYSE) with the market value of US$21 trillion as of April 2018 is world’s one of the largest stock market.

How Does Stock Market Works?

The stock markets work through different exchanges like Nasdaq, NYSE. Companies list their stocks in these stock exchanges and starts a process for initial public offering (IPO). When stocks listed people can buy stocks and companies get these funds and can use in business expansion. After that exchanges track demand and supply of listed stocks trading and investors can trade with each other.

Some stock exchanges work like auction where buyer interacts with seller directly, and in some other exchanges buyers and sellers works with dealer instead of directly deal with each other.

Stock prices are determined by demand and supply or how many investors willing to trade. All stock can only be bought and sold through licensed stockbrokers. All stock prices are calculated automatically with computer algorithms

What Are The Major Stock Exchange?

Here Are The Top 10 Largest Stock Exchanges of The World by Market Capitalization of Listed Companies

ExchangeLocationMarket capitalization (in trillions)*
New York Stock Exchange (NYSE)U.S.$24.68
Shanghai Stock ExchangeChina$7.05
Tokyo Stock ExchangeJapan$5.31
Shenzhen Stock ExchangeChina$5.15
Hong Kong ExchangesHong Kong$4.57
National Stock Exchange of IndiaIndia$3.32
London Stock ExchangeU.K.$3.17
Saudi Stock ExchangeSaudi Arabia$3.15
*As of July 2022; Source: Statista 

What Are The Different Types Of Stocks?

Generally there are two types of stocks Common Stock and Preferred Stock.

  • Common Stock
  • Preferred Stock
  • Small-cap Stocks
  • Mid-cap Stocks
  • Large-cap Stocks
  • Domestic Stocks
  • International Stocks
  • Growth Stocks
  • Value Stocks
  • IPO Stocks
  • Dividend Stocks
  • Non-dividend Stocks
  • Blue Chip Stocks
  • Penny Stocks

Common Stock:

Most stock are common stock in which people invests in open market. Common stock investors have partial ownership in company with the right to receive proportional share amount of remaining assets if company closed. Common stockholders gets unlimited potential upside potential, but also have risk of losing all investment if company closes and left with no assets left.

Preferred Stock:

Preferred Stock is different and its shareholders gets preference over common stock shareholders to get a certain amount if company closes. They also have right to get dividend payments before common stock shareholders. Preferred stock resembles fixed-income bond investment than common stock. Thus most investors mostly prefer to buy common stock.

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