Stock Market for Dummies: How are Stocks Bought and Sold

A stock market is a private or public market for trading the company stock and derivatives of company stock at an agreed price. Often when we see people glued to the stock and share numbers at the stock exchange, we wonder what is it that keeps these people hooked on to the stock market. If the stock market numbers look all Greek and Latin to you, then here are all the basics that you need to know about the stock market. So go ahead and get your basics right!

Stock Market Education: Basic Stock Market Terms

Have you always wondered what bulls and bears have got to do with the stock market? Well, let us get you started on the basic terms used in the stock market jargon.

Stocks and Shares: Well, first of all let us get to know what stocks are! A stock is nothing but a piece of ownership of a company. Since companies need financial assistance for growth - they sell pieces of ownership of the company by means of stocks. Every individual unit of a stock is called a 'share'.

Dividends: When a company that you have invested in, makes profits, it shares the profit with its stockholders by means of dividends which can be in form of cash, stock, scrip or company property.

Assets: All the valuable company resources and possessions which are worth good money are termed as the company assets.

Bear market: When the prices are low in the stock market and entire market seems to be depreciating, the market is termed as 'Bear Market".

Bull market: Now that we are done with the bears, it is time to know about bulls. When the prices are soaring and the market is rising, it is called bull market.

Understanding the Stock Exchange: How are Stocks Bought and Sold?

Now that you know all the basic terminology of the stock market, let us get to know how the stock market works. You should know that every transaction in the stock exchange is carried out through licensed members who are referred to as brokers. If you wish to participate in stock trading, all you have to do is approach a broker but since most of the stock exchange brokers deal in very high volumes, they generally do not entertain small investors and hence have a network of sub-brokers who provide them with orders. The brokers buy and sell stocks on behalf of their clients and earn a commission from the transactions.

In case you don't want a middleman in the stock transactions there are other options too. A stock exchange is a service that allows investors to access stocks all over the world, so you can buy and sell stocks without the need for a broker. There are also certain banks which allow you to set up your own stock portfolio and buy and sell stocks online using the funds in your bank accounts.