How the stock markets work?

When we buy a stock, we could come to stock market. There are some investments like stock, bond, index, derivatives, etc. You could buy direct or through broker with certain price. If we see the stock market, we must be confused. We can see the man watch the electronic board, buzz about, shout to others, etc. Sometimes we find the traders use finger likes gives sign to other trader. We cannot understand what kind sign that they use. Perhaps, they want buy or sell something.

In the middle of trading, we must know the stock market work. The man on the exchange trades with other trader. They could sell or buy investment. They called as broker. The brokers represent investor at outside exchange. You could contact broker to buy shares or bond. As consequently, you should pay the broker. At least there are two options to buying shares i.e. market order and limit order. Market order refers to buying shares with today price. You can find the stock price quotation at newspaper or online trader. Meanwhile limit order refer to buying shares with “your price.” As consequently, you must wait until the price is fits with you.

They sell capital like stock and bond to other. How stock and bond stand at Exchange? The corporate issuing their shares or bond at Exchange or Initial Public Offering (IPO’s). The corporate must has fulfilled the criteria and condition that Security Exchange Committee (SEC) before. After SEC agrees, the corporate could appoint an underwriter. The Underwriter has job to sell out the corporate stock. They travel around the country and attract investor to buy shares. The underwriter could offer shares to public or public offering. Alternatively, they could sell to company like insurance, pension fund, bank, etc. This activity called private placements. Underwriter determines the success of the IPO’s.

The trading at stock market was controlled by SEC. SEC have the obligation to keep the market fair and honest. They could punish insider trading or other hazard things. They could suspend the exchange-listed company if it breaks the rule. In Writer’s country, Indonesia SEC still forbid short selling and buying on margin. If exchange-listed companies do it, the companies must pay fines.