How does the Stock Market work?

So How does the Stock Market work? Stock market or Share market comprises of investors, traders who buy and sells shares of companies through stock exchanges (ex-National Stock Exchange- Not only shares, but the transaction of bonds, currencies and commodities also takes place through stock exchanges.

How Stocks get listed

Let us say a company “XYZ” wants to go into public for investments. Then it will approach stock exchange for the approval. If the company meets the requirements the exchange, then it approves for the initial public offering(IPO). Through IPO the company shares get listed on the stock exchange. 

Demat Account

If you want to buy shares of a particular company we need a Demat account. Demat is more like a bank account but instead of money, it stores shares in dematerialised form.

How to get a Demat Account

To get a Demat account you need to approach stock exchange approved broker. Ex- Zerodha, Upstox, Icici Direct.

These days discount brokers like Zerodha and Upstox are offering Demat account in 24 hours. Most part of the process is online. Except for a few things like applying nominee and approving power of attorney.

What Next

So you got your Demat account. Now you can buy shares of the companies you like through the panel provided by your broker. 

What drives the Market

The demand and supply drive the complete market. If there is more demand, the volume of buyers and sellers will be more. Fewer demand stocks due to less volume and are more vulnerable to the high volatility (fluctuations).

Difference between Investor and Trader

The millions of investors and traders transact daily in the stock market. These are the one who provides liquidity to the stocks. In brief, investors are the ones who follow fundamental analysis and invest money for a longer time in the market.

Whereas Traders follow technical analysis and their transactions time ranges from a couple of seconds to a few months. That’s the end of the article – How does the Stock Market work? To read more about the differences between the investor and trader CLICK ME

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