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What Is The Stock Market?

Views 48062022.04.08
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Key takeaways

  • Stock trading is like an auction.

  • A stock market is a place for sellers and buyers to trade in stocks.

  • An effective stock market could be vital to economic development.

Understanding the stock market

A stock market is a marketplace for financial activities such as issuing, buying and selling equities of companies. Shares of listed companies are allowed to be traded publicly on exchanges, such as New York Stock Exchange and the Nasdaq. A network of exchanges worldwide constitutes the global stock markets.

Generally speaking, stocks are the main trading category in the stock market. However, equity-related instruments, such as ETFs and derivatives, are also traded in the stock markets.

All transactions are made under agreed-upon rules stated by the exchanges and regulators to provide a rather fair trading mechanism for market participants.

Like an auction

In everyday conversations, the stock market is referred to as a place where sellers and buyers negotiate prices and trade shares.

To put it simply, the process of stock trading is just like an auction. The price of a matchmaking trading between the seller (asking price) and the buyer (biding price) is usually facilitated by stockbrokers. When you bid for a stock, it means you see the upward potential for its future prices. The final actual execution price is affected by many factors, including but not limited to market sentiment, demand and liquidity.

Purposes

A stock market is vital to economic development. Building a healthy and effective stock market will greatly improve the efficiency of capital utilization.

A stock market realizes the goal from two aspects. First, it provides a place for companies to issue their stocks to raise capital, which will be used to sustain or expand their businesses.

Second, the stock market provides an opportunity for individual investors to share in the investment income of listed companies. 

The content in this article is intended for general circulation and informational purposes only. It does not take into account the investment objectives, financial situation or needs of any particular person and should not be relied on as advice or recommendation. Information provided in this article are not specifically intended for or specially targeted at the public in any specific jurisdiction. Neither Moomoo Inc. nor its affiliates are licensed Financial Advisers and do not provide financial advice. You are advised to consult your financial adviser before making any commitment to invest in any capital markets product. The information published is not and does not constitute or form part of any offer, invitation or solicitation to subscribe or to enter into any transaction in capital markets products. Moomoo is a professional trading app offered by Moomoo Inc. In the U.S., investment products and services on Moomoo are offered by Futu Inc., Member FINRA/SIPC. In Singapore investment products and services are offered through Futu Singapore Pte. Ltd., regulated by the Monetary Authority of Singapore (MAS). This advertisement has not been reviewed by the MAS. Moomoo Inc., Futu Inc. and Futu Singapore Pte. Ltd are affiliated companies. Any illustrations, scenarios, or specific securities referenced herein are strictly for illustrative purposes. Past investment performance does not guarantee future results. Investing involves risk and the potential to lose principal.

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