How does the stock market work?

History has shown us many times that stock investments in the stock market are one of the easiest and most profitable ways to achieve high long-term returns. With a handful of exceptions, each name on the lists of the richest people was there because they had large stock investments.

If you have pursued less profitable but conservative investments so far, the idea of ​​investing in the stock market may be of concern to you, but if you understand the exchanges and how the system that turns them works, you will realize that this is not a field to worry about and is a reasonably reasonable investment path.

Forget all the shakes of the investors whose investments have been completely wasted and the urban legends that threw from the heights so far that blur your impression of reality!

We start at the most basic level. What do they call the stock market, why do people buy or sell stocks, how do stocks come out, how do they make money and hit the jackpot? Now we clear everything in a few titles.

The stock market is nothing more than a global giant market, where stocks are bought and sold

You can compare the stock market to a global giant market. Almost every day at a very high amount of money in and out of a large market in the stock market; fruits and vegetables, second-hand cars or eggs are not sold; stocks are mostly bought and sold on the stock exchange.

Stocks express the rights held on the assets in the form of shares

Each share representing the rights held in assets in shares corresponds to a certain share in a company. If you buy a stock that belongs to any company, you also buy part of the company. In other words, you become a partner in the company where you buy the stock.

When a company needs money, it sells its shares on the stock exchange, which is called a public offering

When a company needs money, it decides to sell its shares. This can have many reasons for the company. The company’s desire to open up to different markets, to implement new projects or to grow can be listed as sufficient reasons to sell its shares and raise money.

This is done through a transaction called initial public offering, in which the values of the shares are determined according to the estimated value of the company and how much of the shares will be listed. While the company continues to collect the money required to grow businesses or implement new projects during the public offering, the company’s shares are bought / sold in Borsa Istanbul, NASDAQ or the London Stock Exchange.

The company only makes money from the stocks it sells during the initial public offering, but even if the company no longer makes money from stock sales, investors continue to make a profit by buying and selling shares.

A buyer and a seller are needed to buy and sell on the stock exchange, trading is no different than simple shopping

Stock trading is no different than a simple transaction. Just as buyers and sellers are needed to make a purchase, a buyer and seller must be present for the purchase and sale of shares. For example, when you sell 10 stocks, this means that someone has purchased these shares from you. On the contrary, if you have bought shares from someone, that means someone has sold them to you.

The stock market is a market where many buyers and sellers gather and sell stocks by pulling prices up or down.

Because the stock market is a site where many investors are gathered by buying and selling stock prices that pull up or down, investors make money or lose depending on how well their views on a particular company are accepted across the market.

Generally, it is not an easy task to predict which stock price will rise or fall. Because at some times the price of stocks goes up as a whole, while at other times it goes down. However, with a handful of exceptions, many stock traders do not care about short-term changes in stock prices, as the stock market is considered a long-term investment instrument.

However, investors adopting a long-term approach to the stock market collect shares from different regions or sectors. The aim is to eliminate the problems that may arise in a certain sector or region, reduce risks and maximize earnings. This is called diversification.

The ultimate purpose of buying and selling stocks is to make money by buying and selling shares of companies that are expected to do good work, that is, their share values will rise.

The main purpose of investors to buy and sell stocks in the stock market is to make money. In this way, stocks of companies which are thought to do good business or that are below their current value and which are expected to multiply their value in the future are taken, the right time is waited, and when the share price reaches the target price, shares are sold and money is earned.

An investor holding a stock whose price is too high can make a sale in order to lock this profit and turn the stock into money

The fact that not everyone has the same target and plan in the stock market pushes investors to sell stocks at different times. For example, an investor holding a price that is too high in his portfolio may sell it to make a profit.

So everyone just sells their shares when they make a profit? No. For example, a seller may have to sell the shares he buys at a high price for a low price, which means that the seller has suffered losses. The seller may immediately dispose of his shares in order to avoid further loss as he foresees a downturn.

On the other hand, sellers may decide to sell their shares as they anticipate that the prices of their shares will fall in line with their analysis, foresight and research. For example, the realization of a sale does not always mean profit.