How Does the Stock Market Work?
When a company needs capital to grow, it goes public through an Initial Public Offering (IPO), listing its shares on an exchange. Once listed, those shares can be freely traded between investors.
Every trade is executed through a central order book. When a buyer's bid price matches a seller's ask price, the transaction is completed — typically within milliseconds.
Share prices reflect the collective judgment of all market participants: company earnings, sector trends, macroeconomic data, and investor expectations all feed into the price at any given moment.
How Stock Exchanges Work
Stock exchanges are regulated marketplaces where shares of publicly listed companies are bought and sold. Each country has its own exchange overseen by a financial regulator.
Trading is conducted electronically via order books. A transaction is completed when a buyer's bid matches a seller's ask price. Settlement typically follows a T+2 cycle.
Stock Indices
A stock index tracks the aggregate performance of a selected group of shares and expresses it as a single number. Well-known global indices include the S&P 500, Dow Jones, DAX, FTSE 100, and Nikkei 225.
When an index rises, the constituent stocks have on average gained value. Individual stocks, however, can diverge significantly from the index in either direction.