Thursday November 12, 2020 - 11:18:47 GMT
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How stock markets work
In today’s time, the stock market has become more accessible to people. Today thanks to the advent of technology and myriad options available, people can actually open their online trading accounts easily. Anyone who has good credit and financial history, sufficient money and a good internet connection can easily think of investing in stock markets without needing the immediate need of the brokers. People need to get acquainted with the rules and regulations of the trading market. There are many young people who are taking interest in the stock markets and betting. Most of them also participate in gambling sites to place wagers on matches and games and win huge amounts of money. Among all the games, the slot games are a favourite among the gamblers as they are easy to play and a great source for making huge amounts of money, without needing to have adequate knowledge or experience about gambling. Mobile gaming has made slot games fun and accessible. For example, there are interesting and lucrative welcome bonuses for mobile slots UK which any player can avail of.
Stock markets can show similarities towards gambling but there is a slight difference. Gambling is usually for short-term and is done for fun and entertainment whereas people engage in investing in stocks for a long-term purpose. It is interesting to learn how stock markets work.
Arranging for capital
There are two kinds of financing - a) equity financing and b) debt financing. For a startup, equity financing is a suitable way to go for. The startup has to arrange for capital from friends, families, relatives, and well-wishers. When the business becomes more intensive, then they can source additional funds from angel investors and venture capital companies. Debt financing is not suitable for startups because it will be difficult for them to keep their assets as collateral or pay back interest on the loans.
When an organisation thinks of long-term growth, it has to think of financing and sourcing for money which cannot be fully supported by loans from the traditional banking system. This is why the companies sell their shares through an IPO. Now, the ownership of the company changes from private to public limited corporation. Many organisations list themselves in stock exchanges, where the prices of these shares fluctuate and the traders and investors decide the value of the shares.
Setting share prices
There are many ways of fixing the prices of shares. The most common way of fixing the prices of shares is through the bidding and selling process. Also known as the auction process, it is a method where buyers and sellers meet and interact together to buy and sell shares. A bid is a price at which a person is interested to buy the share and the offer is the price at which the person is interested to sell the share. The stock exchange makes this process easier. It is a platform where trading of shares is facilitated by matching the buyers and sellers of the stock.
Demand and supply
The laws of demand and supply are very much applicable to stock markets. When there are more buyers for stocks, the prices of the stock will increase and if there are more sellers than buyers, the stock prices will decrease.
Stock market indices
The most popular stock market indices are Dow Jones International Average (DJIA) and S&P 500. The former is a price-weighted index of 30 American companies and the latter is a market-cap weighted index of 500 American companies and is regarded as the most suitable index in terms of future investors and traded funds.
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