Definition of stock market
Known as the Stock Exchange, the Exchange is a regulated market for the sale and purchase of securities, such as Stakes, shares, and bonds, as defined as a general field offered by any organization, association, or group of personal finance, to trade securities representing corporate equity. The Exchange provides two primary services through the provision of a trading system; namely: It provides a market for buying and selling shares and provides a means to monitor the value of the portfolio of securities investments.
Exchange Terms
The success of the Exchange in the investment process depends on being characterized by a range of conditions, the most important of which are:
Size: A necessary condition for the Exchange; Whenever they contain many companies, this increases the total value of the shares traded in them and helps investors diversify into risk, not focusing on a limited number of financial papers.
Liquidity: Access to money through financial securities. When the stock market is large, the liquidity ratio is high.
Transparency: The ability of the stock market to continuously provide appropriate information about the companies within it and all movements that involve buying and selling to investors, thereby reducing the manipulation of financial information or a group of investors obtaining financial data above others.
Stability: The ability of the stock market not to be affected by sharp price fluctuations as a result of unreasonable expectations, and the impact of rumors on financial paper prices, which lead to high or low prices, resulting in the deviation of financial paper prices from their real value, does not reverse the actual performance of their issuers, such as companies.
Exchange Functions
The stock exchange offers two functions, namely:
- Primary markets: Companies, governments, municipalities, and other United Nations bodies can raise capital by directing investors' savings to productive projects.
- Secondary markets: Investors in secondary markets can sell securities to other investors, which reduces investment risk, maintains liquidity in the system, and exchanges impose strict rules, scheduled requirements, and binding legal requirements for all listed and traded parties.
How to make trades on the stock exchange
Trades are made on old exchanges on the ground, called the Exchange's trading floor. Modern exchanges are made via telephone or the Internet through the open screaming system. All businesses can be considered auctions, with buyers participating in competitive tenders and sellers participating in competitive orders during the trading day. Yet, some European exchanges used the periodic auction method Amsterdam's first Exchange was opened in 1602.
The world's three largest exchanges
The world's three largest exchanges are ranked downward according to the following:
- New York Stock Exchange.
- London Stock Exchange.
- Tokyo Stock Exchange.
The fundamentals of the Exchange
depend on the purchase of equity shares in a company, known as common equity. The return on investment depends on the success or failure of the company in which the investment was made. When the company works skillfully and earns profits from its products or services, it benefits from its success. Thus, there are two main ways to earn money on the Exchange:
- Dividend to shareholders
Stocks that pay dividends above average are sometimes referred to as income stocks. When publicly owned companies are profitable, they can distribute some of these profits to shareholders. By paying dividends, the company's shareholders can take its earnings in cash. Or buy more shares in the company, and many retired investors also focus on stocks with regular dividends to compensate for the income they did not take from their previous jobs.
- Capital gains
Their prices change at all times, and shares are bought and sold continuously during each trading day. When the cost of the purchased stock rises at a lower price, it can be sold and earned. If the shares are sold at more melancholy than the purchased price, they are a loss of capital.
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The New York Stock market is the largest stock exchange in the world.
The New York Stock Exchange is the world's largest existing stock exchange. Located on Wall Street in the U.S. state of New York, it was founded in 1817 but was named the New York Stock Exchange in 1963. The New York Stock Exchange had a market value of $23.12 trillion in March 2018. The number of companies listed on the New York Stock Exchange is more than 2,400 from different sectors, such as the energy sector, finance, and health care.
How the New York Stock Exchange works
Traded on the NYSE either through brokers or electronically, financial transactions are made at auction, no matter how trading takes place. For example, brokers trade shares on the stock exchange, where sellers and buyers auction at a higher price. And brokers represent the entity that buys the shares, determining the sale price of the claims and the so-called offer price. After the share is offered, it is sold when another broker wants to buy it. One of the terms of trading on the NYSE is that traders and brokers get the approval of the exchange Trade transactions are done electronically through the computer that plays the role of the dealer, i.e., whoever combines the seller with the buyer.
New York Stock Exchange Rules of Procedure
According to Eastern Time in the United States, work on the New York Stock Exchange begins at 9:30 a.m. and ends at 4 p.m. The day is announced and concluded by ringing the bell after hitting the bell button. The bell became the official mark for the commencement and termination of the day of circulation in 1903.
The Dow Jones index
The Dow Jones Industrial Index or Dow 30, an industrial index of the 30 largest U.S. industrial companies on the New York Stock Exchange, was established on May 26, 1896. It was the oldest index in the world and contained the 12 largest American companies, the first of which was General Electric. The number of listed companies began to increase until it reached 30 in 1928, and the companies listed in the index included Scheffron and Bank of America on February 19, 2008.
The Dow Jones Industrial Average shows selected price averages from stocks and bonds in the New York stock market. Dow Jones and its partners calculate these averages for each business day, 24/7. It is a financial publishing institution. There are four types of averages:
1. Average share prices of 30 industrial companies.
2. Average share prices of Mowasel's 20.
3. Average share prices of 15 public service companies.
4. The average share prices of the above companies combined (65 companies). The public is following with interest the news of these averages.
These averages are the most commonly used among investors, the average prices of industrial shares. The rise and decline of these averages are expressed as points. For example, if the industrial average at the closing hour one day was 879.32, rising the next day to 882.56, economists determine the average rise in this case by 3.24 points.
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