World Info

Stock Exchange and how it works

stock market

The stock exchange or the stock market, a market that collects, issues and trades shares, bonds and other securities, allowing companies to support their capital by giving investors part of their ownership and knowing the stock exchange as the markets that include the exchange of securities within a region or country And depends on the existence of value or price of shares traded in them. Another of the BSE's tariffs is that it is the activity that depends on the purchase and sale of shares within a specific general level of prices for each day.

How the Stock Exchange Works

The work of the Stock Exchange (securities) is applied by dividing its market into two types:

The main market and the secondary market: The main market is selling new securities for the first time through the application of a series of IPO offers, and the founders often get investors from most of the securities.

In the secondary market, all subsequent operations are carried out, and many investors, both individuals and institutions, participate in this market.

The stock exchange usually conducts private trading in equity companies through a combination of exchanges between sellers and buyers. Shares traded are listed in trading transactions and can be electronically executed. These include the purchase and sale of shares and all securities.

The purchase of securities (stocks) that increase or fall in prices, and these are encouraging reasons for many investors to buy a group of them in most professional sectors, and called this thing called diversification, and often the purpose of buying diversified stocks is to get money through dealing with shares Companies that are expected to make a good profit, leading to the rise in the price of its shares, and the sale of securities (shares) is a deal between the seller and the buyer; when the price of the stock seeking sellers to sell, as buyers are willing to buy, Each Buys shares offered to buy when you reach a specific point of the price.

The benefits of investing in the stock market

Investment in the stock exchange offers a range of benefits to individuals and enterprises. These benefits are summarized according to the following points:

Taking advantage of the growth of the economy and the profits of enterprises: Because growth in the economic sector contributes to the production of income, which leads to the strengthening of demand for products, resulting in an increase in the value of private cash revenues in companies.
Easy to buy: Any investor can buy securities and stocks in an easy way by having a broker or financial analyst, or by relying on the Internet.
Getting money, which is by applying two methods, are two :

Buy securities at low prices and then sell at high prices. This is considered the behavior of the majority of investors who aspire to benefit from the profits of companies whose stock prices grow over time.
Many investors prefer to get money by buying shares of companies that offer them financial profits because they achieve moderate growth.

Easy to sell: If the investor needs money, it is possible to sell some of his shares at any time, but as a result of the volatility of securities prices may show the risk of bearing the loss due to this sale.

The disadvantages of investment in the stock exchange

The investment in the stock exchange sometimes leads to a set of negatives, and the following information :

Loss of the entire investment: The investor may lose his full investment in case the company loses and its share prices fall. The rest of the investors decide to sell their shares, which leads to the loss of all the initial investment for each investor.

The need for a lot of time: the investment in the stock exchange takes a long time to choose between enterprises, and determine the ability of each of them to achieve profits; through the follow-up of annual reports and financial statements and developments in companies, in order to obtain the best investment price to participate in the market Money bills.

The emergence of fluctuations in stock prices: The stock market faces a significant variation in the prices of shares and all other securities, which affects the decisions of individuals in buying and selling.

The emergence of competition: New investors face competition with professional investors or traders who have the time to invest, unlike individual investors who need to know how to gain this advantage.

Stock Exchange Conditions

The success of the stock market in the investment process depends on that it is characterized by a set of conditions, the most important of which :

Volume: a necessary condition for the stock exchange; as it contains many companies contributed to the increase in the total value of shares traded, and helps investors to diversify risk, and not focus on a limited number of securities.

Liquidity: The possibility of obtaining money through securities, and when the size of the stock market is large, the liquidity ratio is high in the market.

Transparency: The ability of the stock market to provide appropriate information continuously about the companies in them and all movements that involve buying and selling to investors, and this leads to the reduction of manipulation of financial information, or a group of investors financial data before others.

Stability: The ability of the stock market to be unaffected by sharp price fluctuations due to irrational expectations and the impact of rumors on securities prices, which lead to their rise or fall. This results in a deviation of the prices of securities from their real value, Issued by, such as companies.