What Is A Stock Market & How Does It Work? A Little Bit Of History Back in the 1600’s in those dark and smoky Amsterdam coffee houses, the Dutch East India Company turned to private investors to fund the company’s operational activities. They sold securities amongst themselves in these coffee houses for a share of the company’s profits. Capital Management Services help you to understand share market, and how its work?
Creators Of The First Bourse Savvy investors made money and the Dutch East India Company grew exponentially. Unwittingly, both these original Dutch investors and the company created the world’s first stock market. London Bankers & Global Expansion With the momentum garnered by the industrial revolution, the City Of London soon followed this new business model and took it to a different level. A Complex Beast Essentially, a stock market is a place of business and trade where companies seek the investment funds of several different types of investors. Today, the modern stock market is significantly more complex, fragmented and refined than its original incarnation.
What Is A Stock Market & How Does It Work? So How Do They Work? A privately incorporated company, limited in liability, decides to launch itself on the stock market. First, this company will promote itself to institutional investors and if these investors like the company, they will be the first to invest in the company and sponsor its listing on the stock market. This is commonly known as an Initial Public Offering- ‘’ IPO’’.
The Secondary Market Once the shares in the company are listed, floated for public investor consumption, trading in them begins. Buy and sell orders are executed by market participants, and when the number of buyers exceeds the number of sellers, the price of the shares increase. Conversely, when sellers out number buyers the price of the shares decrease. The market value of the company, otherwise known as the company’s market capitalisation, swings up and down in line with the number of buyers v sellers and vice versa.
What Is A Stock Market & How Does It Work? Supply & Demand This is influenced by a vast multitude of factors including market sentiment. Fear and greed, those two famous intangibles dictate market direction for both sectors and specific companies.
Price Influencers Additionally, production costs, changes in production technology and the shifting costs of labour, management changes, bad publicity and finally, larger factors like new laws and trade policies, all affect the price of a company’s stock. Stock Market Investing & Trading Today Unlike the days prior to deregulation and the consequential big bang back in 1986, where colourfully attired traders would shout and scream in trading pits across the globe, today, most if not all buy and sell orders, are executed through low latency computers and smart order routing systems via a broker, who is simply a middleman. Advanced Technology & Evolving Times Technology has changed the operational structures of stock market participation, and made investing and trading available to anyone with a
What Is A Stock Market & How Does It Work? computer and internet connection. Yes, you can invest / trade from the comfort of your armchair. In conclusion, our materially driven capitalist system, with its vast array of choices available to the consumer, would not exist in today’s format without stock markets, their participants and the multitude of price action drivers.