How the stock market works for dummies.

A thread:

Think of the stock market as a virtual store that allows buyers and sellers (you and I) to make trades.

The stock market operates via a series of “exchanges” , where traders and brokers meet to buy or sell securities (stocks, for simplification purposes). Think New York Stock Exchange (NYSE) & NASDAQ

Think of a company as a sectioned chocolate bar . Each individual piece is a share of stock. When you buy a share of stock, you become a shareholder or part owner of the company.

Company X ( The chocolate bar) wants access to more money , so it decides to become a publicly traded company via an Initial Public Offering (IPO) in which its shares become publicly available for purchase on one of the stock exchanges

Lets say you want to buy 5 shares , or 5 pieces of the chocolate bar.
If company X’s stock price is $100 per share, you would pay $100 x 5 shares = $500 to own 5 shares.

Suppose the stock price of company X increases from $100 to $200 per share. $200 x the 5 shares you purchased earlier = $1,000.

To determine your profit , subtract the initial purchase amount of $500 from the new amount. $1,000-$500 for a profit of $500!. Its that simple

Basic Terminology:

Market Capitalization: This is just a company’s stock price multiplied by all of its current outstanding shares. If Company X has 1 million shares outstanding , at a stock price of $5 per share, its market cap would be $5 million

Security : think of a security as an investment vehicle or method of investing. Securities are either debt, equity (ownership) of a combination of both