What is stock?

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What is the stock market? To some people, it is a gold mine. To others, it might be a strange place that does not belong in their 'world' and thus, something that should not be explored. And to the rest, its basically a legal casino.

Stocks, in a very general concept, represent ownership in a company. A stock market is not unlike a wet market where you bought your groceries from. The only difference, is that the people wear suits and they don't smell like fish.

Buying stocks in a stock market is very much like buying apples. Everyday, when the stock market opens, people who want to buy apples or sell apples will then gather in a large open field. Everybody's very civilised here, so they will queue up. At the front of the queue, it will be a big signboard saying how much this particular queue of people are willing to buy or sell apples at.

Lets say that today apples are currently worth 50cents. At the side where people want to buy apples, there are people lining up in the 49cents queue, the 48cents queue, the 47cents queue, and so on. On the side where people want to sell apples, there are people lining up at the 51cents queue, the 52cents queue and so on.

When a buyer who is queuing up decides he's really hungry and he wants an apple now, he will then go to the 51cents seller and buy the apples from him. Likewise, if a seller really wants to sell an apple, maybe because he ate apples for the past 20 years of his life, he goes to the buyers at 49cents, and sells to them his apples. When that happens, the price transacted at will be known as the last done price.

And that would only be for apples, which is liken to just a single company on the stock market. Thus, the stock market on the whole, is just like a really really huge wet market, with tons of different kinds of fruits, and thousands of buyers and sellers everyday.



Jump to the rest of the articles here:
Why invest
What is the stock market
How to invest and trade
Choosing a brokerage house
Investment styles I (Time)
Investment styles II (Risk)
Investment styles II (Research)
Making the actual trade
Recommended books

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