What is the Stock Market? How to Trade the Stock Market?

What is the Stock Market – Have you ever heard about making money by buying and selling shares? Well, that’s what the stock market is all about.

Many people became very rich by investing in the stock market. On the other hand, some folks lost their money and even risked their careers. This happens more often than you might think.

I can share stories of people who invested a lot in the stock market and lost everything, ending up with no money at all.

But here’s the big question – why do some folks make millions while others ruin their lives in the stock market?

Hey there, welcome to drawwithpappu.com Blog’s new article about “What is the Stock Market.” In this article, you’ll learn all about the stock market and how it works.

And if you’re interested in trading in the stock market, you’ll find out what you need to do to get started.

In today’s article, I’ll answer all your questions, step by step. So if you want to understand the stock market and how it can make or break fortunes, read this article carefully.

By the end of this article, you’ll have a much better understanding of the stock market and its secrets.

What is the Stock Market?

What is the Stock Market? How to Trade the Stock Market?

Before we dive into the nitty-gritty of stock market matters, let’s start with the basics. What exactly is the stock market?

When you decide to buy shares in a company and invest your money, you’re stepping into the world of the stock market. It’s a place where you can make extra money by buying and selling these shares.

In simple terms, it’s like owning a piece of a company. Let’s say you buy 1,000 shares of a company that has a total of 10,000 shares. Congratulations, you now own 10% of that company! If the company makes a profit when it’s sold, you’ll receive 10% of that profit.

Why Does a Company Sell Shares?

Once you’ve grasped the concept of the stock market, you might be curious about why companies sell their shares. After all, if they can make money on their own, why involve others?

Let’s explore this in more detail.

Think of it this way – building a big company requires two essential things. First, there’s the need for growth or expansion, and second, you require a substantial amount of money, which we call capital.

Without expansion, people won’t even know your company exists. On the other hand, to make your company grow, you need a lot of money.

Now, there are many individuals out there who dream of creating large-scale companies but lack the necessary capital.

So, what do they do? They invite others to join their venture by selling a percentage (%) of their company’s shares.

If you decide to buy, let’s say, 10% of a company’s shares, and that company eventually earns a lot of money, you’ll receive 10% of the profits made by the company.

This is why many big companies sell shares in their parent companies. Wealthy individuals purchase these shares and, in turn, receive extra profits. It’s a win-win situation for both the company and the investors.

How Does the Share Market Work?

What is the Stock Market? How to Trade the Stock Market?

By now, you’ve learned about “What is the stock market” and why companies sell shares. So, what’s next? Let’s uncover how the stock market works and how you, as a newcomer, can be a part of it.
Look around the world, and you’ll find that every big or developed country has its stock market. For instance, we have the Dhaka Stock Exchange and Chittagong Stock Exchange. Similarly, our neighbor India has its National Stock Exchange.

And it’s not just in these countries; you can find stock markets in other countries too, especially in those that are becoming more developed.

Now, you might be wondering, how do these stock markets function? Well, here’s the lowdown –

Let’s say you want to sell shares of a company you own. Your first stop is your country’s Stock Exchange. There, you’ll need to provide all the necessary information about your company and its shares.

If someone is interested in buying your shares, they’ll also contact the Stock Exchange to register their interest. This is the basic process of how the stock market operates. It’s like a marketplace for buying and selling shares, connecting sellers and buyers through the Stock Exchange.

What are the Types of Stock Market?

What is the Stock Market? How to Trade the Stock Market?

To truly grasp the world of the stock market, you can’t overlook the different types of stock markets. If you skip this part, you might miss out on important information.

Now, I won’t go into the details of how many types of stock markets there are in other countries because they might differ. However, in our country, we primarily have two types of stock markets. These two categories play a key role in the trading of shares.

Primary Share

Throughout history and even today, primary share trading has always piqued people’s interest. Many individuals embark on their stock market journey through primary shares, whether buying or selling.

This is because, in primary share trading, companies sell shares to interested individuals, who, in turn, invest a substantial amount of money. The beauty of this is that both the company and the investors stand to benefit.

Let’s illustrate this with an example

Imagine you own a company, and you decide to divide it into 1,000 shares. You set the price of each share at Rs 100. When someone buys your company’s shares, they pay Rs 100 per share and an additional premium of Rs 50. This means those purchasing your shares pay a total of Rs 150 per share.

This is how primary share trading operates. If you’re considering investing in primary shares, you can follow a similar approach to make the most of this opportunity.

Secondary Share (Secondary Share)

Secondary share markets work a bit differently from primary shares. If you try to approach them the same way, you might find yourself in a tight spot.

If you want to make more money in the stock market, you need to be a bit more savvy. That’s because if you can’t navigate this market with some technical know-how, your chances of success are lower.

So, in primary shares, you can buy directly from the company. However, in the secondary market, you buy shares from another shareholder instead of the company itself. This is why it’s called the secondary stock market.

You might wonder, why buy shares from someone else instead of the company? Here’s why –

Buying shares directly from a company often requires a good amount of capital. Some companies also set their share prices and premiums quite high, making it hard for you to get in.

But if you buy shares from a shareholder, you can avoid these hurdles and make your way into the stock market more easily.

Why is the Price of the Stock Market Low?

After learning about “What is the stock market” and “Types of stock market,” there’s one more crucial thing to understand – why do stock prices sometimes go up and down?

When you buy shares from a company, you may notice that the share price can be quite low at times. Other times, it can be much higher. What’s the reason behind this? Let’s shed some light on it.

Imagine a company divides its shares into 50 pieces. They find that many shares are sold in a short time because there are more buyers than shares available. So, they raise the price of their shares to make more profit. This sudden increase in share price can happen in the stock market.

On the other hand, there are times when share prices drop. For instance, a company splits its shares and sets the price at Rs. 500 per share. However, people show little interest in buying at that price. To sell more shares, the company lowered the price from 500 to 300 taka, causing a significant decrease in share price.

It’s important to note that not all companies’ share prices behave this way. Some companies see their share prices continually rise. There are various reasons behind these fluctuations, and we’ll delve into them in detail.

What Does the Price of the Stock Market Depend on?

In the world of business, there are two sides – making profits and facing losses. Now, when you get into share trading, how can you tell whether the shares you buy from a company will bring you profit or result in a loss? There are several ways to figure this out.

In this article, we’ll explore these methods and help you understand whether buying shares from a particular company will be a wise decision or lead to losses. For instance – [Include an example or explanation here.]

Company Share Issue

Before you decide to invest in a company’s shares, it’s crucial to have a good understanding of how that company issues its shares. If you don’t know about this process, you might encounter difficulties in the future.

So, when you’re thinking about buying shares from a company, you should have a grasp of all the details related to the share issuance. Are there interested buyers, and is there a list of them? How many shares are available, and is the price in line with what buyers are willing to pay? You can find out all these important details by examining the company’s share issuance process.

Share Buy Back (Share Buy Back)

Share buybacks are something that owners typically do. When individuals who own shares of a company buy some of those shares themselves, it can cause the value of the shares in the stock market to rise. Let’s illustrate this with an example.

Imagine you’ve divided a company into 10 shares, and out of those 10, you decide to purchase 5 shares for yourself. As a result, the number of shares available for others decreases.

With this reduction in available shares, the share price might suddenly go up. So, if you ever plan to sell your company shares, it’s a good idea to use these techniques. On the other hand, if you’re in the market to buy shares, pay close attention to this aspect. These are some of the factors that can help you determine whether you’ll gain or lose when you buy a share.

When Should You Buy the Stock Market?

Before we dive into whether you’ll make a profit or a loss when buying shares, the first thing to consider is when is the right time for you to enter the stock market with dreams of making lots of money.

In other words, you want to know when you’ll get more profit from buying shares and when it’s not the right time to invest. Let’s explore this further.

There are several techniques and factors you should pay attention to when buying in the stock market. For instance, [Include examples or explanations of these techniques in your article.]

Company Background

When you’re considering buying shares in a company, it’s crucial to do a thorough background check on that company. Companies that have successfully earned people’s trust in the past often have the potential for profitable shares in the future. So, it’s a good idea to invest in shares of a company that you can trust.

For this reason, it’s essential to keep an eye on the latest stock market news to make informed decisions about which companies to invest in.

Financial Solvency

One of the most important aspects of entering the stock market is ensuring that you are in a strong financial position. This is because in the world of stock trading, you have the potential to make millions, but you can also lose a substantial amount of money in the blink of an eye.

No one can guarantee that buying shares in any company will definitely lead to profits. So, if your financial situation is not in good shape and you invest without proper consideration, you could end up losing all your money, leaving you in a difficult situation.

It’s crucial to buy shares when you are financially stable, so you don’t put your family’s well-being at risk if things don’t go as planned.

Pay Close Attention

One secret to making more money in the stock market is to stay attentive. If you can master this skill, it can lead to substantial gains from your investments.

Before you decide to buy shares in a company, it’s essential to keep an eye on various sources of information. What kinds of company shares are people buying, and are they expecting profits in the future?

In general, you should continuously monitor what’s happening in the stock market. The more time you spend doing this, the more experience you’ll gain. Eventually, you’ll develop your insights on when and how to buy shares in a company, increasing your chances of success.

Low Share Price

When you’re ready to buy shares, it’s a good strategy to look for affordable shares. These low-priced shares provide you with the opportunity for future profits.

Why choose cheaper shares? Well, when you invest in lower-priced shares, your initial investment amount is lower as well. This means that if the shares you buy don’t perform well in the future and you face a loss, you won’t lose as much money compared to higher-priced shares.

Pro Tips – Newspapers are a valuable source of information about the latest news related to companies in the stock market. Whether it’s good news or bad news about a company, newspapers cover it every Friday. So, make it a habit to check the news in the papers every Friday to stay informed about what’s happening with different companies in the stock market.

What is the Method of Investing in the Stock Market?

After learning about various aspects of the stock market, you might be wondering, “How can I buy shares in a company?” To profit from share trading, you need to follow a few important steps, just like you would in any other line of work.

Here’s how it works –

STEP 1 – To start your journey in the stock market, you’ll need to set up a special account called a Demat Account. Think of it like a bank account for your investments. You can open this account with various stock brokers, either in person or online.

STEP 2 – When you earn money through share trading, it won’t go directly to your regular bank account. Instead, it will be deposited into your Demat Account. From there, you can transfer your earnings to your regular bank account.

STEP 3 – Keep in mind that when you create your Demat Account, you’ll need to provide some essential information, like your National ID, proof of address, and tax ID. Once your account is ready, you can start investing your money in the stock market, buying shares from different companies as you see fit.

With these steps, you’ll be on your way to exploring the world of share trading and potentially growing your wealth.

What Did You Learn About the Stock Market?

At the beginning of this article, I promised to cover everything from understanding what the stock market is to delving into various aspects of it. I’ve tried to provide detailed insights into the stock market.

If you’ve read this article carefully, you’ve likely gained a significant understanding of the stock market. Let’s recap what we’ve discussed in this article and what you’ve learned

  • We started by exploring what the stock market is and what it represents.
  • We talked about the ways to make a profit in the stock market and how you can earn money from it.
  • We took an in-depth look at the Dhaka stock market, including its current state.
  • Additionally, we covered several other essential topics that will be valuable for your journey in share trading.

By going through this article, you’ve acquired essential knowledge to help you navigate the stock market more effectively.

Frequently Asked Questions

What is the Stock Market?

The stock market is a marketplace where individuals can buy and sell shares of publicly traded companies. It allows investors to own a portion of a company and potentially profit from its success.

How Does the Stock Market Work?

The stock market operates as a platform where buyers and sellers meet to trade shares. Companies sell shares to raise capital for growth, and investors can buy or sell these shares through stock exchanges.

Why Do Companies Sell Shares?

Companies sell shares to raise capital for expansion. Selling shares allows them to invite external investors, who, in return, become partial owners and may receive a share of the company’s profits.

What are Primary and Secondary Markets in the Stock Market?

Primary markets involve the direct sale of shares from a company to investors. Secondary markets involve the buying and selling of shares between investors, not directly from the company.

Why Do Stock Prices Fluctuate?

Stock prices can fluctuate due to various factors such as demand and supply, company performance, economic conditions, and investor sentiment. These fluctuations create opportunities for profit or loss.

What Influences the Price of Stocks?

Factors influencing stock prices include company performance, market trends, economic indicators, and investor perception. Understanding these factors can help investors make informed decisions.

When Should I Buy Stocks?

The timing of buying stocks depends on factors like the company’s background, financial solvency, and market conditions. It’s crucial to conduct thorough research and invest when financially stable.

How Can I Start Trading in the Stock Market?

To start trading, you need a Demat Account. Open an account with a stockbroker, provide the necessary documentation, and deposit funds. Once your account is set up, you can buy and sell shares through the stock market.

What Should I Consider Before Investing?

Before investing, consider the company’s background, and financial stability, and stay informed about market trends. Pay attention to the news, monitor stock prices, and invest when you are financially stable.

Can I Lose Money in the Stock Market?

Yes, investing in the stock market carries risks, and it’s possible to lose money. It’s essential to diversify your investments, conduct thorough research, and invest responsibly.

Where Can I Find More Information About the Stock Market?

Explore reputable financial websites, read books on stock market investing, and consider taking online courses. Staying curious and continually learning will enhance your understanding of the stock market.

We trust that this brief article has provided you with a clear understanding of what the stock market is all about. If you have any remaining questions or if there’s more you’d like to know about the stock market, please don’t hesitate to leave a comment.

Keep following the drawwithpappu.com Blog for more insightful information. Thank you for your time and attention.

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