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Stock Market Work

How Does The Stock Market Work?

The stock market is a platform where buyers and sells are bought together to exchange securities. The exchange securities include not only stocks but also bonds and other exchange traded funds. The securities are listed on the stock exchange and can be traded in the secondary market. Retail investors need to open an account with a stockbroker to be able to trade on the exchange.The participants in the stock market are retail investors as well as big institutions like fund managers and banks. There are a number of stock exchanges in India. The Bombay Stock Exchange and the National Stock Exchange are the two major exchanges in India.

Stock Market, How Does It Work?

Like any market, the stock market is a place where one buys and the other sells. The job of a broker is to match the buy and the sell orders and get the best possible price for both the parties.Once a trader places a buy order it gets fed into an electronic system. It then gets you a match of a seller who is ready to sell at the buyer's price or at a lower price. Once the match happens the seller can now sell to the buyer.The bid price is the price at which a buyer buys and offer price is the price at which the seller is ready to sell.Stock market provides a lot of liquidly to the trader or the investor. There are a lot of market participants trading in the stock market, which makes buying and selling stocks very liquid. This means that as soon as a trader is interested in buying a share at a particular price, he quickly gets a match of a seller who is ready to sell at the specified price or even at a lower price.

Importance Of Stock Market

Government and organisations are able to raise capital for their business from individuals as well as institutions, through the stock market. Once a company decides to raise money and get its shares listed, it sells the company shares to investors as an Initial Public Offering (IPO). This is the primary market. After the shares are sold they are now tradable on the secondary market.