Companies create and issue financial securities in the primary market, and investors trade these securities on the secondary market. For this reason, the secondary market is sometimes called the “securities market.”
The secondary market includes stock markets, bond markets, and options markets, although stock markets receive the most publicity and attention.
What is a Stock Market?
A stock market is a place where willing buyers and sellers exchange stocks. Most publicly traded companies have their stock listed on a stock market exchange, such as the New York Stock Exchange (NYSE) or the National Association of Securities Dealers Automated Quotations (NASDAQ). Similar exchanges exist in most major economies throughout the world, many of which are linked together electronically.
Each stock listed on a stock exchange is represented by a stock ticker, which is a unique identifier assigned to each security traded on a particular market. For example, AAPL represents Apple and HD represents The Home Depot. A stock symbol can consist of letters, numbers, or a combination of both.
The picture Wall Street likes to paint of an “opening bell” followed by frantic trading in a huge room is mostly fiction in the 21st century. Today, most stock trading is done electronically through an online broker. You can buy or sell securities from the comfort of your home, and the entire online transaction is efficient and straightforward.
How Does the Stock Market Work?
The price of each security traded in these markets is determined by supply and demand, just as prices are established in any free market.
Millions of investors from across the world participate in financial markets, and the collective effort determines how stocks (and other financial securities) are priced.