What is Stock Market ?
In this article we are going to stud Basics of Stock Market. This article contains the information of Stock Market for Beginners, how to start investing in the stock market, documents required for investing in the stock market and many more. Before understanding the Stock Market, let’s understand what is Stock and Market. What is the Market ? Market is a place or a platform where trade happens. The place where buying and selling happen is known as the Market. What is Stock ? , Stock means the companies on which people are going to trade. In simple words we can say Stock means Companies which people are going to buy and sell. Now, combining the word Stock and Market we get the word Stock Market. Stock Market means the place where buying and selling takes place of Stocks / Companies. This is a platform where companies are bought or sold. This is known as the Stock Market.
Stock Market gives various chances for investment, to grow money, growing business, etc. It gives a chance to the common people to invest in big companies as well as it provides funds for the companies to grow more from investors. This platform is used from common people till the big investors.
There are various people, organizations, companies, etc. involved in the Stock Market. Let’s learn about them.
- Investors : Investors are the ones who invest in the companies by purchasing some part of a company. By providing funds to the company, the investor becomes the owner of the company of a specific percent which is dependent on his amount of investment.
- Brokers : Brokers are the ones who help investors for trade. As there are buyers and sellers in the market, brokers help by sending their trade to the exchange in an easy way and with security. Brokers take brokerages to make trade possible for the investors. This varies through broker to broker.
- Exchanges : This is a place where stocks are bought and sold. Trade of the investors takes place through exchanges. There are many exchanges such as the National Stock Exchange, New York Stock Exchange, etc.
- Depositories : We are required to have a Bank Account, Trading Account and Demat Account for trading in the Stock Market. We will understand about these accounts and documents in the further part of this article. Demat accounts are opened under Depositories. The shares purchased by the investors are kept in the Demat Account. Depositories are for helping investors if they are not able to access their shares there are some certain conditions like if Brokers run away, Investor forgot to access his shares, etc.
- Security Body : As there is an Army, to protect the country, there is a security body for the investors, companies, etc. It helps investors by keeping an eye on everyone involved in the Stock Market. The work of this body is to reduce frauds and other illegal activities in the Stock Market. There are various security bodies for various stock exchanges such as Security and Exchange Board of India.
Documents and other things required for investors for investing in the Stock Market.
We are required Trading Account, Demat Account and Bank Account for investing in the Stock Market. For opening these accounts documents required are as below :
- Bank Account : Bank Account is opened in the Banks. For opening a Bank Account there are various processes and documents which vary from bank to bank as well as country to country. Some common documents are i ) Government issued Identity Proof : Such as in India Aadhar Card is required. ii ) Passport Size Photograph. iii ) Taxpayer identity proof and its number.
- Trading Account : Trading Account is opened under Exchanges. While opening a Demat account, a Trading Account is opened by default. If anyone is opening only a Trading Account he requires : i ) Government issued Identity Proof. ii ) Passport Size Photograph, iii ) Taxpayer identity proof and its number. iv ) Address proof. v ) Bank Passbook issued by Banks.vi ) Mobile Number vii ) Email id.
- Demat Account : For opening Demat account, the documents which are required and mentioned for Trading Account above are required, which are : Government issued Identity Proof, Passport Size Photograph, Taxpayer identity proof and its number, Address proof, Bank Passbook issued by Banks, Mobile Number, Email id.
How stocks are traded ?
- As we discussed above, stocks are traded by exchanges with the help of brokers and depositories.
- Investors who want to buy the shares in the Stock Market need to add an amount in his trading account so that he can pay the seller by purchasing shares from him.
- Investors need to give their buying and selling orders to the brokers, which the broker sends to the exchanges.
- There are two types of orders, which are Market Order and Limit Order. i ) Market order : It means giving orders for buying or selling the stocks at current Market Price. ii ) Limit Order : It means giving orders for buying and selling the share at a specific price and the trade will get executed when the price of the share reaches that price.
- In the exchange, these orders are matched electronically and are executed.
- The share sold by the seller is transferred in the Demat Account of the Buyer and the amount which is given by the buyer to buy the share is transferred to the seller in sellers Trading account.
- The information of buying and selling such as : Average price at which shares are bought, Profit , Losses, Amount of the Share , etc. are shown by the broker on the broker’s platform.
We have cover a small part of the Basics of Stock Market in which we have covered about the stock market, the market, the stocks, person, organization, etc. involved in the stock market, documents required for investing in the stock market as well as the accounts need to open for investing in the stock market and how stocks are traded. We will discuss next part of the Basics of Stock Market in the next article of Basics of Stock Market.