'Know-How' of the Stock Market

Seen the numbers with company names in green upside arrow and red downside arrow on the top of a newspaper? On the sidebars of the News channels? Wondered what they are?

It's the stock market index. The market looks very complicated with all the numbers and stats, however it's very interesting once you learn how the market works. 

So if you're interested in the market, but never tried entering it as you fail to understand the market, then you have landed at the right spot. 

You will get to learn about the stock market from the scratch here.. 

Below are the basics (in general) of a Stock Market

What is Stock Exchange?

A market wherein the securities are bought and sold. Securities are financial instruments, such as : bonds, debentures, shares (stocks) and warrants. 

How does the market work? 

The market is divided into two : Primary Market & Secondary Market. 

Primary Market :  It's a platform where the Initial Public Offering (IPO) is done i.e. the companies introduce or issue their shares in the market. 

Secondary Market : It's a platform wherein the traders trade the initially issued securities (without the involvement of the issuing-companies). This Secondary Market is what people refer to when they talk about the Stock Market. 

Why do companies list their securities or stocks on the Stock Exchange? 

Companies may decide to issue their securities (shares or bonds) for various reasons. The ultimate aim however is to raise capital. Now this need of raising the capital could be an outcome of need for expansion, repayment of debts or the most general - start up capital. 

When you buy a share of a firm, you're buying a piece of the company's ownership. The size of stake depends on the number of shares you hold against the number of total shares of the company. 

Types of Traders

There are mainly two types of players in the market - Stock Traders and Stock Investors. 

Stock Traders : Stock traders are more interested in the market's analysis than that of an individual company whose share they own. These are people who are interested in short term gains lasting anywhere from seconds to weeks. 

Stock Investors : On the other hand stock investors are the ones who use their own money to invest in the shares and recognize stocks are an ownership of a company. They believe in buying the stock and holding it on for a long period of time to make huge profits. They earn profits in the form of interests, income or value appreciations.

Types of Trading

Depending on how long a trader holds on to a financial instrument - trading can be classified into the following categories :

Day Trading : It's a type of trading wherein the buyers and sellers trade their financial instrument on the same day i.e. all tradings are closed before the market closes down for the day. Traders who participate in day trading are called Day Traders.  Day trading is not advisable for beginners as it involves quick decision making and actions.

Short Term Trading : A trade period of more than one day to a few weeks is called Short Term Trading. A short trade is entered by making a sell position, which is covered by buying after one day or in a few weeks.

Medium Term Trading : A trade period from a few weeks to months is called Medium Term Trading. A trend is followed with tailoring stop loss.

Long Term Trading : In this type of trading, the stocks are held on for months to years. Investment decisions are made based on the fundamental analysis of a stock. Profit from growth  of the company, dividends and bonuses attracts this type of stock trading.

Hope you enjoyed this bit of information about the stock market. There's more to come, so keep an eye out on our blog.

We believe that this opportunity will help you learn and grow your knowledge and understanding of the stock market. So give yourself a chance to learn more and become a kingpin in this field.

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