How Does the Stock Market Work?

In order to properly answer the question how does the the stock market work, first I have to explain what is the stock market. The stock market is a place where stocks are traded. And as for every market, there must be buyers and sellers. Buyers represent demand and sellers represent supply.

The price of any stock is determined by relationship between supply and demand, by market participants willing to buy or sell at a certain price. If demand exceeds supply, price should rise. If supply exceeds demand, price should fall. This economic principle applies to every market.

From this results that for a deeper understanding of what makes the price of a stock change, it is necessary to know what influences supply and demand. There is a lot of factors that determine price movement and their effect is relative because only buyers and sellers know why they bought or sold any given stock. Between these factors belongs news about company, industry or the whole economy. If good news comes out on a company, the price and demand for the stock mostly go up. When bad news occurs, the price and demand mostly go down. Next factor is information about company's performance like sales growth, earnings, production and so on, next element is the market psychology, what is topic itself, and generally there is countless amount of other factors that influence opinions of market participants.

Nowadays these stock trades are very organized and performed electronically by computers in stock exchanges like New York Stock Exchange (NYSE). Stock trading is very popular and everybody with little capital and phone or computer with internet connection can be part of the stock market.

Stock and Option Trading

This is my first post so forehand I would like to welcome you in my blog. My intention is to share my knowledge and personal experience with you. At start I will talk about stock and option basics and later I will move on to more advanced informations. I will talk about stock market, option trading strategies, trading psychology, money management, fundamental and technical analysis, trading tools and other topics belonging to stock and option trading.

For some of you it can be stock and option trading course but the main purpose of this site is to share valuable informations about stock and option trading. From part it will reflect my journey from beginner to more experienced trader.

I think one of the biggest mistake that a lot of people do is that they put their hard-earned money to some stock they know almost nothing about and they pray and hope that price of stock will go up. That’s stupid. They should spend some time learning and researching. And this rule applies to everything you put money in.