What is market? What is the stock market – investing market?
Learn the basic meaning of a market and the stock market in general today. How the markets work and what are the particularities of the stock market.
Economics today defines the word ‘Market’ as an construct where buyers and sellers come together in interacting with each other directly or indirectly and sell and buy goods from each other of from a third party involved.
Market signifies any specialized arrangement in which the sale and the purchase of goods take place. It is all about the competition between demand and supply.
The word Market used to refer to a specialized place localized to a specialized location but today market resides mostly in the virtual world where it dictates the conditions and commercial relationships facilitating transactions between buyers and sellers.
This are the most usual types of Markets today
- The Physical Markets – A physical market is a actual place where buyers can physically meet with sellers and purchase goods from them in exchange of cash or other goods. Physical markets can be malls, retail stores and grocery stores for example.
- The Non Physical Markets or better known The Online Markets – The Online Markets like the stock market use the internet to bring buyers and sellers together to exchange their goods. Some examples of Online Markets: – Amazon shopping, eBay and many others.
- The Market for Raw Material Goods – In this markets the sellers sell raw materials to other sellers that need the materials to produce their own products for selling.
- The Knowledge Market – The Knowledge market is the type of market in which the sell of information and knowledge is the main driver.
- The Auction Market – The auction market is the type of market in which the seller organizes an auction in order to sell his goods to the buyers at the highest bidder.
- The The Black Market – This is actually a less talked about market because it represents the illegal way of doing business and it is not a good and safe place to invest your time and money in.
- And last but not least is the Financial Market which is our main topic here. The Financial market enables the trade of money or liquid cash. There are more then one type of financial markets today. The most common are the below listed:
- The Bonds Market – The exchange of bonds also called debt securities is what is exchanged on a bonds market today. What is a bond exactly? Well a bond is a type of contract signed by both sellers and buyers and the buyer has to return the money borrowed with interest at fixed intervals in time.
- The Foreign Exchange Market – Also called FOREX is the market specialized in trading international currency. Also called the currency market, FOREX is the market in which the buyer or seller exchanges one country’s currency with the equivalent in value of another country’s currency coin.
- The Futures Markets – This market is also known as the predictive market. The futures predictive market is the market in which the exchange of goods or services takes place in the future. The buyer will profit when the market surges and he will be loosing if the market goes down.
- Stock Market – Well this is our most talked about market. The Stock Market is the type of market where the exchange of shares is the main driver. Buyers also called Bulls and Sellers also called Bears, they exchange stocks of any given company in order to make profits from the difference in price between the buy or sell point and the close position point.
The Stock Market also known as Stock Investing Market
The stock market is the virtual place that drives the issuing, buying, and selling of stocks, also known as equities in economic terminology. This is called trading and it’s done on a stock exchange or over-the-counter exchange. In the stock market for example the buyers and sellers do not have to meet in person at a particular location but they can contact and interact with each other by any means such as the internet and apps available today for trade and exchange.
In fact stocks are a fractional ownership of a company. The stock market is useful because it gives companies the ability to fast access to external capital from public investors.
The stock market also is comprised of 3 branches:
- Stock Dealers “Over the counter dealers or OTC”
- Exchanges – This markets are fully automated and do not require any broker or dealer to process transactions. Most stock trading apps today work through this type of market as they are fully automated and can serve many requests at fantastic speed. Stock Investing is usually their main driver.
- Brokerages – Broker markets are used for all types of securities at the beginning of their life. If a company files for IPO, it will have to be launched through a bank called the investor bank and will act as the company broker until the IPO date.
Market facilitates Buying And Selling Between Buyers and Sellers
There are usually 2 entities acting in a market transaction are called the buyers and the sellers. The buyers buy goods from the sellers and take payment in return. There is normally more buyers then sellers or vice versa. To be competitive the market must have a discrepancy in the numbers of sellers / buyers. There are cases however where in a market we can find a Market Monopoly.
Market Monopoly means there is a single seller of particular goods and there are many buyers in that market that can buy those goods. In monopoly there is no competition for the seller and this gives the seller a complete control over the prices in his monopoly products. Without competition the prices can surge without otherwise justification. Just because there is nobody to offer the same products for less the monopoly seller can keep increasing his prices just because he can.