Understanding Stock Market Basics

One of the common problems for fresh investors and most investors face is in understanding about the stock market and shares. The general population has a perspective that shares, securities, stocks, and equities are different. In fact, they all are the same. Owning a share of a stock represents that a particular individual has a share of a company or corporation. He/she is capable of claiming the exact proportionate of assets and earnings as of the share he/she owns.

A stock market is a marketplace where exchanges and Over The Counter (OTC) market places exist and where securities are issued by exchanges and bought and sold at both of the above market places. Securities that are not listed in a formal exchange or listed securities that have been removed from exchange are traded at over-the-counter (OTC). Here a broker-dealer network is mostly involved in the trading of the securities as opposed to on a centralized exchange. Here requirements of the standard market exchange are not met by the securities.

How are shares floated from the primary market to the secondary market?

Why Do Share Prices Fluctuate?

In a market millions of traders and investors are present, each with a different idea for the worth if particular security or stock. They all have a different price at which they intend to buy or sell a particular security. When transactions are made by the investors and traders reflecting their intentions through buying and selling of securities, bringing about a change in price as it spirals its way up and down during the trade hours of a day.

A regulating body of the country’s capital market is the Bangladesh Securities Exchange Commission, established on the 8^th of June 1993 through the enactment of the Securities Exchange Commission Act 1993. This is a statutory body under the Ministry of Finance. Bangladesh Securities Exchange Commission functions to monitor the price change in the Stock market and to prevent any sudden price hike and fall by intervening.

Who are stockbrokers?

Trading is performed at the exchanges. Investors and traders need to get access to the exchanges to execute their buy or sell order. A stockbroker acts middleman between the buyer and seller. As mentioned earlier, the process for price changes of security here can also be explained by the laws of demand and supply. A buyer and a seller are required for the transaction of each security. When there are more available buyers for a specific stock than of the sellers, the price of the security follows an uptrend pattern. On the other hand, the reverse is observed when more available sellers are present.

What are bid price and ask price?

The bid price for a security is the price that a buyer has bid for or is willing to pay. Ask price represents the lowest price that a seller is asking for to sell the security. A trade is made when either the buyers ready to accept the asking price or the seller is ready to take the bid price. The bid price may rise when buyers surpass sellers and the buyers are willing to acquire the securities. In such a situation, the sellers may ask for a higher ask price taking advantage of the circumstances. On the contrary, if sellers outnumber buyers ask price may fall as buyers try to lower their bids.