Question

How Does The Stock Market Work?

Please write a 2-4 paragraph explanation on the prompt.

Please include an APA citation from a reliable source.

Answer 1

The way stock market works is very simple. It operates much like in auction House, where buyers and sellers negotiate the price and make trades.

The place this happens is called an exchange.

The companies list their shares on the exchange through a process called initial public offering.
IPO happens in the primary market with the help of investment banks.  
Through an initial public offering, the Company directly deals with the public or the investors.

Exchange are secondary markets where an investor deals with another investor.

Securities exchanges, or exchanges, are where traders can meet to arrange their trades. Like New York stock exchange.

They are generally order-driven.

Order-driven markets arrange trades by matching buy orders with sell orders.  

The buyer offers a bid price and the seller quotes an Ask price. With the demand & supply forces into play the matching happens.

The trades successful happens with the help of brokers who match the order with the help of order matching system. The investor can Access the stock market through his brokerage account.