How Does the Stock Market Work?
The stock market is a market where financial assets such as stocks, bonds, commodities, derivatives are traded. The stock market is a mechanism in which prices are determined according to the balance of supply and demand. Investors who want to trade in the stock market can access the stock market through intermediary institutions. Brokerage houses ensure the realization of transactions by transmitting the orders of the investors to the stock market.
The prices of financial assets traded in the stock market change according to the supply and demand in the market. The supply is the number of investors willing to sell; demand refers to the number of investors willing to buy. When supply exceeds demand, prices fall, and when demand exceeds supply, prices rise. Thus, the stock market helps the market find the equilibrium point.
Investors who want to trade in the stock market must first recognize and analyze the financial assets traded in the stock market. The prices of financial assets are affected by many factors such as market news, expectations, data and policies. By following these factors and using technical analysis methods, investors can try to predict the future price movements of financial assets.
Trading on the stock market is both a lucrative and risky activity. Investors should determine a strategy suitable for their risk profile and implement it in a disciplined manner while trading in the stock market. In addition, investors should keep their emotions under control and not panic or get excited when trading in the stock market. Thus, they can increase their chances of success in the stock market.