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DEFINITION:
On the stock exchange, buyers and sellers come together to trade in shares of approved companies.
Understanding the stock market
Stocks are bought and sold on exchanges that bring together buyers and sellers of shares in publicly traded companies. Stock markets function much like auctions, where potential buyers name the highest price they’re willing to pay (“the bid”) and potential sellers name the lowest price they’re willing to accept (“the ask”). The actual price for executing a trade is somewhere between the bid price and the ask price. Trades may be placed by stockbrokers, usually on behalf of portfolio managers or individual investors like you. In the U.S., the stock market consists of 13 exchanges – the best known are the New York Stock Exchange and Nasdaq.
Takeaway
Stock markets are complex, but they’re all based on a simple concept…
From New York to Hong Kong, every exchange helps bring together buyers and sellers who trade according to agreed-upon rules.