You may be wondering how share market works. Well, all share markets in the world work in the same way, and they are all guided by common trading policies since all countries depend on each other for survival and comfort through imports and exports of various stocks.
A stock market is a common trading platform for buyers and sellers of shares. All share markets normally use common valuation methods in order determine the appropriate value of various stocks in the stock markets, and this creates accountability in the performance of stocks. Stock markets normally have stock brokers who buy and sell stock on behalf of their clients since a stock market is normally not large enough to hold all the stock investors of a country. This helps in reducing commotions and confusion in the stock markets. Stocks brokers also help in creating accountability of the various stock flows in a stock market.
Many new investors ask how share market works. This is because there are many obstacles that may come along when an individual wants to invest in stock. Many companies despite the size can experience financial constrains and thus this may lead to sharing and partnering between various companies. For instance, a company which may be suffering financially may decide to sell some of its shares. The profits which will be incurred by that company will be shared equally depending on the percentage of shares that the other company has bought. For example, if that company has bought shares in a 50% basis, the profits incurred will also be shared by 50%. This is more advantageous to that particular company instead of borrowing loans from financial institutions which will later be returned with a high interest. It is advisable for the company which is buying the shares of another company to get the contract signed in order to avoid any risks.
A stock market is a place where companies sell their shares to the public at different prices. There are brokers who are negotiators between the investors and the companies. Many people need to know how the stock market works. In order to understand this, one has to know the different brokerage firms and how they operate. The selling of shares takes place in the stock exchange market where both buyers and sellers come together and quote different prices. The highest bidder then buys the shares.
When one for instance wants to buy shares from Safaricom Company, the following takes place.
The order is placed by the investor, the broker then places the order with the company and the clerk gives the order to the company’s floor trader. He then goes to the stock exchange area of Safaricom and looks for one who is selling them. They agree on the price and the order is then executed. The trader communicates to the clerk and then to the broker and finally the investor.