We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

How does the Stock Market Function?

By Michael Totten
Updated May 16, 2024
Our promise to you
SmartCapitalMind is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At SmartCapitalMind, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject-matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

The stock market is a market where people buy and sell parts of companies. The parts being bought and sold are a financial interest in the company called stocks. The companies involved must be publicly held companies, which means that they have to be companies that sell stocks to public investors on an open market.

Companies that sell stocks to investors usually do so in order to raise capital. The capital is then used for things such as financing current operations and paying for expansion plans. If the company is able to turn the capital into profits, a share of the profits is passed on to investors. Similarly, if the company loses money, investors share the loss.

The stock market is simply a central place where people come together to buy and sell stocks. However, the stock market is not a store or a single building. It doesn't really have a physical location. However, when people think of the stock market they typically think of Wall Street or the New York Stock Exchange, also known as the NYSE. These places do not encompass the entire stock market, but they are locations where much of the activity in the stock market occurs.

The NYSE is perhaps the principal stock exchange in the world. Not all companies’ stocks are traded in the NYSE, but it is the trading home of some of the most impressive and well-respected companies in the world. To purchase stocks of these companies on the floor of the NYSE, investors need a substantial amount of assets to invest. Nevertheless, the small investor can obtain less expensive investing through brokers, including online companies. With a small balance, online brokers allow investors to bypass the trader on the NYSE floor, and make electronic purchases and sales on their own.

An important aspect of the stock market is that it is made up of a primary market and a secondary market. The primary market is where securities are sold for a company’s initial public offering, known as the IPO. The IPO is the base price used when a private company makes the first sale of its stock to the public. After doing so, it becomes a publicly held company. It is a much less active market than the secondary market, which is where investors trade in companies that are already publicly held. The stock market primarily deals with the secondary market.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Link to Sources
Discussion Comments
By anon106353 — On Aug 25, 2010

Is the story continued somewhere? I wanted to know how it worked, not what it was. For example, if there is a series of bids and asks running up and down the various price levels, then how does the exchange decide which way to tick? Or what does the structure of the broker/dealer network look like? How/where are orders routed for processing? I guess i have to keep looking. --Wannabe Trader

By anon22701 — On Dec 09, 2008

When is the stock market open and closed for trading stock in Pacific time and what does after hours mean?

By malena — On Feb 03, 2008

The NASDAQ (National Association of Securities Dealers Automated Quotations) is another major stock exchange -- an American stock exchange. The Johannesburg Securities Exchange, London Stock Exchange, Sao Paulo Stock Exchange, Tokyo Stock Exchange and Toronto Stock Exchange are some other major stock exchanges in the world.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.