What is the stock market and how does it work? Many people do not know the stock market and how it works and what is its importance
To present everything related to this topic, we must know that the stock market is a word that goes back to the first name of the big family
who lived in the state of “Belgium” and bore the name “van der Borden” and he and his family owned a hotel in the city of “Brugge”
This hotel was a large meeting place for the great merchants of that period, which was in the fifteenth century.
This family established a large market through the hotel with a lot of money and commodity trading. The first lists of the stock exchange and its prices were published in the year 1592.
And that is the city of “Anvers” and in general about what the stock exchange is and how it works, as it is the great market for securities
It is an ordinary market, but without goods or commodities, all that is traded in it is papers and not actual money.
They are in the form of shares or bonds, and it is known that each will have a set of technical and legal rules that determine its performance and determine the basis on which the selection of securities is made, and the time to dispose of them so that the stock exchange investor does not suffer a loss or enter into the loss of his entire wealth. Many investors have been exposed to huge losses Which led them to declare bankruptcy and withdraw from the money market.
What is the stock market?
And a definition of what is the “stock market” in economics is
A stock market whose work is to issue, trade, and collect so-called shares, securities, and bonds
This allows different companies to provide capital support, by giving investors the right to own some of their underlying bonds
Accordingly, it is a market for the exchange of securities in different countries.
The stock market depends on determining the value and price of the shares in which it is traded
The stock exchange has activity in buying and selling, and the price of these operations is determined daily according to the economic situation that each country is going through
There is no doubt that the global economy has an active role in determining the exchange rates in stock exchanges, the price of bonds, and the decrease or increase in the movement of trading within the stock exchange.
We must know that the meaning of the arrow “Stock” is
A certificate belonging to the shareholders proving their right of ownership in the company that contributes to the stock exchange
That is, it is the share that the investor actually owns and is part of the basic capital of the company and can be invested and traded in the stock market
As for the bonds, their name is “Bonds.”
A written contract that contains an undertaking to pay the money on the due date when the agreed terms are met.
and she too...
A group of contracts and agreements related to loans. Each agreement and contract is called a bond
They are also the sums of money that the government or establishments borrow and pledge to pay with interest on an agreed date
Bonds are considered a sealed instrument, and they are a guarantee provided by the individual, the government, or the company, which is complicated by the payment of the value that has been taken.
How does the stock market work?
After you read about what the stock exchange is and know some information about it, now you have to know about how the stock market works.
The stock market or the financial business market operates through two types of markets, the main market, and the secondary market
The main market sells the securities that are presented for the first time, and many offers called subscription offers are presented.
The subscription comes in two types.
Public subscription, but this type of subscription may cause a lot of controversies and financial problems, so it is preferable to use a private or closed subscription
Because the public subscription is shared by the general public, that is, they buy shares in the company
The second type of subscription is the closed subscription, which is an invitation to specific names to purchase shares.
The secondary market, it is responsible for carrying out the operations that complete the trading process
Many institutions, investors, and individuals participate in this market, and the stock exchange process trades the shares of companies
Through a reciprocal process that brings together buyers and sellers through trading deals
Currently, these operations are carried out through the Internet and have become even easier.
Which encouraged many individuals, whether investors or ordinary people in all fields, which is called diversification in the market from entering the stock markets
The process of selling shares is often a transaction that occurs between the buyer and seller, and it is a standard process
When the stock falls, the seller sells it immediately, and the buyer has a successful process of buying this stock, but this is done based on specific price criteria known to those who have experience in the stock market.
The importance of the stock market
The stock exchange is of great importance in the economy of countries, so the state must carry out full supervision and do not leave that to ordinary individuals
For the trading operations on the stock exchange to take place successfully, the state establishes laws and a system that works on the proper conduct of these operations
Among the most important features of the stock market are:
- The stock exchange is the meeting place for the investor as well as for financing. It is a suitable place for those looking for funding, such as organizations and companies
- , for those who wish to invest. Therefore, the stock exchange is a process that benefits both parties but provided that there are laws that protect those transactions.
- The stock market is the economic indicator of the country, so the status of the major companies in the stock market has a return on the global economic market. The name of
- the company and the volume of its financial and economic transactions make countries and international companies evaluate the economy of that country.
- The stock market is a major reason for increasing wealth inside the country, as those transactions in the stock exchange, which are called trade exchange,
- are considered the open market for investments and savings for businessmen,
- as a foreign investment when it comes to any country and deals in the stock market increases the wealth of the country.
- The stock market is working to create a very large labor market, a bubble filled with huge numbers of workers,
- and it also provides new fields of work. For example, we find that there are so-called brokerage firms that have large numbers of workers, which is reflected in reducing the unemployment rate in the country.
- The stock market acts as a financier for companies, and it is an alternative to borrowing from banks and avoiding the high benefits that companies face when borrowing. When any large company needs financing, it performs a
- a process called “subscription.”
- The troubled company obtains it through the stock exchange, and the stock exchange
- does not take any interest when the process is completed, unlike what is done in banks, but this process is considered the company’s selling parts of it to other individuals.