There’s a lot to get your head around when it comes to the stock market. Bulls, bears, investment firms and big banks are just a few of the many parts of this complex system that influences how you may or may not earn money from investing in stocks. Understanding the lingo can make it feel like a different language, but it’s important to understand the basics so you can learn more about how the stock market works and what it means when prices rise or fall.
Essentially, the stock market is where companies raise vast sums of money from normal investors like you and me to help them grow their businesses. The money you invest is called shares and represents a partial ownership in the company. The value of the share can go up or down depending on demand and supply. These values are then tracked in an index (like the Dow Jones Industrial Average, which tracks 30 large companies or the S&P 500, which follows 500 large companies).
A key point to remember is that shares can only be bought and sold when there is a willing buyer and seller. This is where the stock exchanges (like the NYSE or Nasdaq) come in. These places bring together buyers and sellers to facilitate transactions quickly and efficiently. Each exchange has two prices for a stock – the bid and the ask. Prices are constantly changing as buyers and sellers negotiate new prices with each other.
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