How the market works

Guest bloggers: Alex C, Carson S, Drew H

Before you can understand how the stock market works you need to know what the stock market is. In the simplest form it is a market that corporations offer up shares of their company. These are traded through exchanges.

 

Now you can fully understand and comprehend how it works. Basically the consumers are seen as the market, they do all the buying and even selling of the stocks. The goal in all of this is for the companies to make money by people buying their stocks, the consumers make money by the stocks rising in price. So if they invest $50 in a stock and it doubles to $100 they will make a profit of $50 when they sell the stock. When you buy a piece of stock you are investing into that company and technically own a small portion of that business.

The three stock exchanges in the U.S. are NASDAQ, NYSE, and AMEX. The NASDAQ is the largest electronic stock market while the NYSE is more of an auction stock market that requires a client to have a stock broker make trades for them. With the AMEX, it mostly focuses on trades with small companies.

  • One, don’t get too emotional. This would mean to not invest in a company you personally like.
  • Two, stay away from controversial companies. For example, try not to invest in company that are in the news about some disease outbreak in their food.
  • Three, don’t panic when the market plunges. Buy more while they are cheap. Even though a stock you invested in goes down does not mean to sell it keep with it maybe in a few months that stock will rise.

This is how the stock market works and operates. Maybe one day you can use your knowledge of the stock market and make millions!

photo courtesy of Forbes.com

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