Market Basic

Hello friends, hope you all are doing good, I am here to explain the stock market basic.

What is the Stock Market?

In simple term stock market is a place where shares of pubic listed companies are traded. Here you can buy and sell the share of a company to gain profit. you all may think it's in the google and anyone can tell us that right, yea you right, but I will explain the definition in-depth here. first, I will tell what is a share, what is a stock market and then whats is a public listed company and how can we make money from share market, you may all want to know only about it right?. so let's get going.

what is a share

whats is meant by a share, "Shares represent a fraction of ownership in a business" for example imagine that I have started a company, a car manufacturing company, I stared it with my own fund at a valuation of 100k, so I own 100% of shares of my company. Here each share cost 10k(for ease of understanding I explain like this actually companies has hundreds and thousands of shares).  Imagine that after years my dedication and effort I made my company a big brand and it is becoming one of the top companies in the country. to make my company one of the best company in the industry I have an idea of developing an electric car which will revolutionize the car manufacturing industry but I don't have the fund to do so. at this point, I thought about the stock market and making my company a public listed company and raise fund from the public.

what is a stock market

Here comes the stock market's role, Stock market can help my company to raise the fund for my project from the public. so in simple terms, a "stock market help companies to raise fund for the expansion, development and improvement of the business". Now you all be thinking how does the stock market help to raise the fund right. here companies offers the share of the company to the public, so from my example I have 10 shares worth 10k each right. now my company has become a big brand and has great goodwill in the market and also I found my company's total valuation is around 1000k. here I issued 3 of my share to the public at 100k for each, out my 10 shares which were valued at 10k. so this is how the companies raise fund from the market. Any company cannot go to the stock market and sell their share to raise fund, there strict rules associated in issuing share to to public. they have to follow guidelines to meet the necessary requirements and has to get the approval from the regulations controlling the stock market.

whats is a public listed company

So how does the company issue the share to the public right!, here comes our third question what is public listed company, as per  Investopedia "a public listed company is any company whose ownership is organized via shares of stock which are intended to be freely traded on a stock exchange or in over-the-counter markets, ie after issuing the share to the public, the public can trade these stocks freely in the secondary market so that the price of the stock is fluctuating". when a company has to issue stock to the market it can only issue through primary market ie through IPO(initial public offering), now you will be having doubts what are primary markets and secondary market, a primary market is where a company issue its share for the first time to the public ie through IP(IPO is the process of listing the stock in the primary market) and here most of the buyers are large-scale investor, institutional investors promoters etc. Nowadays we can directly apply to the primary market. these stock which are issued in the primary market are later sold in the secondary market and in the secondary market, the traded again and again as the price fluctuates.

how can we make money from share market 

our last and final question how do we make money from the stock market, most interesting topic. we can make money by trading the listed stocks from the secondary market, form my example my company successfully find the best cost-efficient electric car after listing the stocks in the market when the people come to know about it they are willing to buy my listed stock from the buyers who bought it from the primary market, the initial offering was at 100k but the people ready buy the stock from the price 100k to 200k so the demand of the stock goes up as the price started shooting. The initial buyers sold at 200K as rice goes up with a profit 100k ie 100%. It is just an example, if my project failed to build the electric car then the price of the share will go down as the investors have no other option but to book loss. In the stock market, you can make money and also lose money.

Types of trading 

There are 3 different types of trades happen in a stock market INVESTING, SWING TRADES and INTRADAY TRADING. INVESTING in stock is like buying and holding it for years which will give big profits gain on your capital and SWING TRADE which is usually buying and holding it for a month or less. Here we can make a decent and standard profit compared to INVESTING. And finally INTRADAY TRADING, here trade happens in a single day ie buy in the morning when the market opens and sell in the evening before market close. here we can make a minimal profit compared to INVESTING and SWING TRADES. But still lot of people interested in intraday because of it Intraday trading involves buying & selling of stocks within the same trading days and intraday trading does not block your capital after the market is over. The stock traders can very easily analyze the trend of the stock market and thus trade accordingly to make money in a short time or in a day

So hope you all understood the what's meant by the stock market and how its works thank you guys, will see you all in another blog with more excitement topics