Think of It Like a Farmers Market
Imagine a huge farmers market in your town. But instead of selling tomatoes and bread, vendors are selling tiny pieces of companies.
Farmers Market
- Buyers and sellers meet
- Prices change based on demand
- Has opening and closing hours
Stock Market
- Buyers and sellers meet
- Prices change based on demand
- Has opening and closing hours
See? It's the same concept! The stock market just deals with company ownership instead of vegetables.
The stock market is a voting machine in the short run, but a weighing machine in the long run.
The Big Stock Exchanges
When people say “the stock market,” they usually mean stock exchanges. These are the actual places (mostly electronic now) where stocks are traded. The two biggest in the US are:
NYSE
New York Stock Exchange - the largest in the world. Home to “blue chip” companies like Coca-Cola, Disney, and Walmart.
Founded in 1792 • Wall Street, NYC
NASDAQ
All-electronic exchange. Home to many tech giants like Apple, Microsoft, Amazon, and Google.
Founded in 1971 • 100% Electronic
How Does Trading Actually Work?
Here's what happens when you buy a stock:
You Place an Order
Using your broker's app (like Fidelity or Robinhood), you say “I want to buy 5 shares of Apple.” (StockCram is not affiliated with any brokerage.)
Your Broker Finds a Seller
Your broker sends your order to the exchange (NASDAQ for Apple). The exchange matches you with someone who wants to sell.
The Trade Executes
Money leaves your account, shares enter your account. This happens in milliseconds. You now own 5 shares of Apple!
Fun fact: In the old days, traders would physically meet on the exchange floor and shout orders at each other. Now 99% of trades happen electronically in microseconds!
Why Does the Stock Market Exist?
The stock market serves two important purposes:
For Companies
It's a way to raise money. By selling shares, companies get cash to grow their business without taking on debt.
For Investors
It's a way to grow wealth. By buying shares, you can participate in the success of great companies.
What Makes Prices Go Up and Down?
Stock prices change constantly based on supply and demand. This creates volatility. Here's the simple version:
Price Goes UP when:
More people want to buy than sell. High demand, limited supply.
Price Goes DOWN when:
More people want to sell than buy. Low demand, high supply.
Things that affect demand: company earnings, economic news, investor sentiment, industry trends, and sometimes just rumors!