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What is the stock market?

TL: DR

  • The stock market is place where buyers and sellers of publicly traded company shares come to transact

  • For a practical example, NYSE and Nasdaq are two of the most famous stock exchanges

What is the stock market?


The stock market is a marketplace to buy and sell shares of publicly traded companies.


The stock market operates similarly to an auction market.


Buyers list the highest price they are willing to pay per share (the bid) and sellers list the lowest price they are willing to accept and sell to (the ask). When a buyer accepts the price of a seller (or vice versa) then a transaction takes place.


When talking about “the stock market” investors more precisely refer to stock exchanges such as NYSE and Nasdaq in the US, or their counterparts in other countries.


Example of a stock market transaction: Pansy wants to sell 5 stocks of XYZ and RJ wants to buy 5 stocks of XYZ. Pansy looks at the list of sellers and sees that RJ is willing to buy stocks at $1.00 per share. If she accepts RJ’s price, then the exchange records a transaction at $1.00 per share and that is the last price of the stock. Or she can say “I am only willing to sell at $1.25” and put herself on the list of sellers waiting for someone to accept her price.