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How does the stock market work?
Quick answer
The stock market works by matching buyers and sellers of company shares on exchanges. Prices move continuously based on supply and demand, which reflect investors' changing expectations about each company's future. Companies sell shares to raise money; investors buy them to own a piece and seek returns.
Step by step
- Companies sell shares to raise money; investors buy them to own a piece and seek returns.
- Exchanges (like the NYSE or NSE) match buy and sell orders, setting a live price.
- A price rises when buyers outweigh sellers and falls when the reverse is true.
- Brokers and apps give individuals access; indexes track the overall market's direction.
People also ask
How is a stock's price decided?
By the highest price buyers will pay and the lowest sellers will accept at any moment — continuously matched on the exchange.
How do people make money in stocks?
Mainly two ways: selling shares for more than they paid (capital gains) and receiving dividends (a share of company profits).
What is an index like the S&P 500?
A basket of representative stocks used to measure how a section of the market is performing overall.
Part of the guide: Money Basics: Save, Borrow & Invest →