Understanding the Stock Market

How the Stock Market Works

Stock prices go up and down based on supply and demand. When demand for a stock is high, the price will go higher and higher. Likewise, when demand is low, the price will go lower and lower.

If a stock doesn’t move much and looks more like a straight line, it’s because there is a similar number of people that want to buy and sell. This rarely happens as is most likely to occur with smaller companies.

There are two different types of market. The first is called the primary market, which is where IPOs happen. The second is called the secondary market, which is where investors sell to other investors.

Unless an investor subscribes to participate in an IPO, they are mostly going to participate in the secondary market. Both the primary and secondary markets take place within a stock exchange.

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