0The stock market is a fundamental component of the global financial system. It serves as a platform where individuals, businesses, and governments come together to trade securities such as stocks, bonds, and other financial instruments. This chapter explores the structure and functioning of stock markets, their significance, and key concepts to help you get started on your trading journey.
Introduction
The stock market plays a critical role in the economy by facilitating capital formation and investment. Companies list their shares on stock exchanges to raise funds, and investors purchase these shares to earn returns. Understanding how the stock market operates is essential for anyone looking to participate in it.
Key Components of the Stock Market
The stock market comprises several components:
1. **Stock Exchanges:** Platforms like NSE and BSE where securities are traded.
2. **Participants:** Includes retail investors, institutional investors, brokers, and market makers.
3. **Instruments:** Shares, bonds, derivatives, and other tradable financial assets.
How the Stock Market Works
The stock market operates on the principles of supply and demand. Buyers and sellers interact on trading platforms, and prices are determined based on market dynamics. Trades can occur in primary markets (during IPOs) or secondary markets.
