Business
How does a stock exchange work?
A stock exchange works as a marketplace where people buy and sell shares of companies. It matches buyers with sellers, sets prices through supply and demand, and lets companies raise money while giving investors a way to own a piece of a business.
See it in motion.
Watch a 2-minute animated lesson that shows exactly how a stock exchange works.
Step by step
- 1It's an organized market for trading company shares.
- 2Buyers and sellers place orders, and the exchange matches them.
- 3Prices rise and fall with supply and demand.
- 4Companies list shares to raise money from investors.
- 5Examples include the NYSE, Nasdaq, and the BSE.
Frequently asked questions
- How are stock prices set?
- By supply and demand: if more people want to buy a share than to sell it, the price rises, and vice versa, moment to moment.
- Why do companies list on a stock exchange?
- To raise money by selling shares to the public, which they can use to grow, while giving early owners a way to cash out.
- What does buying a stock mean?
- You own a tiny fraction of the company, sharing in its potential profits (and losses) as its value changes.