What is Share Market? Types of Share Market and How it Works? 2023

The stock market, also known as the share market or equity market, is a marketplace where publicly traded companies' stocks are buy and sell. It is a significant component of the global financial system, as it provides a platform for businesses to raise capital and for investors to earn returns on their investments.

How the stock market works:

1. Companies go public:  When a company wants to grow, it can go public by issuing stocks. This means that it sells ownership of the company to investors in exchange for money. This initial public offering (IPO) is  done through investment banks, which underwrite the offering and help to market the company to investors.
2. Stocks are traded: Once a company's stocks are publicly available, investors can buy and sell them on the stock market. The stock market is made up of various exchanges, such as the New York Stock Exchange (NYSE) and the Nasdaq, where buyers and sellers come together to trade stocks. Investors can either buy stocks directly from the company or from other investors who are looking to sell their shares.
3. Supply and demand affect prices: The prices of stocks are set on by supply and demand. When there are more buyers than sellers, the demand for a stock increases. When there are more sellers than buyers, the supply of a stock increases, which drives down its price. Many factors can affect supply and demand which includes company earnings reports, economic news, and geopolitical events.
4. Brokers facilitate trades: Most individual investors buy and sell stocks through a brokerage firm, which acts as an intermediator between the investor and the stock market. Brokers can execute trades on behalf of their clients and provide advice and research to help them make informed investment decisions. Some brokerage firms also offer online trading platforms, where investors can buy and sell stocks themselves.
5. Returns can be earned through dividends or capital gains:  When a company makes a profit, it can choose to distribute some of those earnings to shareholders in the form of dividends. Investors can also earn returns by selling their stocks for a higher price than they paid for them, which is called a capital gain.

Types of Share Market

There are basically two types of stock markets: the primary market and the secondary market.

1. Primary market: This is where companies raise capital by issuing new stocks to the public for the first time through an initial public offering (IPO). In the primary market, companies work with investment banks to set the price and number of shares to be issued, and investors can buy these new shares directly from the company. Once the shares are sold, they begin trading on the secondary market.
2. Secondary market: This is the type where already-issued stocks are bought and sold between investors. In the secondary market, the price of a stock is determined by supply and demand, and investors can buy and sell shares on various exchanges, such as the New York Stock Exchange (NYSE) or Nasdaq.

Steps to trading on the Stock market:

1. Open a brokerage account: To trade on the stock market, first of all you have to open a brokerage account with a licensed broker. You can choose to work with a full-service broker, who will offer personalized advice and research, or a discount broker, who will offer low fees with less support.
2. Fund your account: Once you have opened a brokerage account, you have to deposit funds into it. Funds can be done through a bank transfer or by mailing a check to your broker.
3. Choose your stocks:  Before you start trading, you have to do your research and choose which stocks are best to buy. take a look at various metrics, such as a company's financial statements, earnings reports, and news articles.
4. Place your order: Once you have chosen the stocks you want to buy, you can place an order through your brokerage account. You can choose to buy stocks at the current market price, or you can set a limit order, which identify the maximum price you are willing to pay.
5. Monitor your investments: Once you have bought stocks, it's important to monitor them regularly to stay informed about any changes in the market or the company's performance. You can also choose to sell your stocks if you think the price has reached your desired level or if you want to cut your losses.

Overall, the stock market is a complex and volatile environment, but it offers opportunities for both companies and investors to grow and succeed vastly. Before investing in the stock market It's important for investors to do their research and understand the risks involved.