When you hear about bulls and bears, investment firms and big banks in the news, you’re hearing about the stock market. It’s the place where entrepreneurs raise money to fund businesses by selling shares in those businesses. Owning shares gives investors a part of a company’s profits (dividends) and the right to vote on certain company matters. A healthy stock market can help fund technological advances like new smartphones and life-saving medications. But a downturn can have broader economic effects, such as reducing consumer confidence and increasing unemployment.
Investors and traders decide the price of a stock by supply and demand. If lots of people want to buy a particular stock, the price will go up. This can happen for many reasons, including good earnings reports, positive economic news in a particular sector or country, and even bad economic news, such as higher unemployment or a recession.
To buy or sell stocks, you need to have a brokerage account and agree on a bid and ask price with another trader. Then you send a trading order with your broker to buy or sell your chosen shares. The price of a stock can change constantly throughout the day as buyers and sellers match up at lightning speed on electronic exchanges like the New York Stock Exchange (NYSE) and Nasdaq. These exchanges are also the places where most trading occurs, and where the majority of orders are filled.