You will have to dedicate a substantial amount of time if you want to make profitable trading decisions. There are various factors that you must consider before buying or selling stocks. The best idea is to start with the preliminary concepts and then move onto the more complicated ones.

What is the stock market?

The stock market is the place where the purchase and sale of stocks take place. Though it is named as the stock market, stocks are not exclusive to trading here. You will also find the exchange of several other securities. There are various stock exchanges that form the stock market.

The importance of these varied stock exchanges cannot be denied. They keep track of the supply and demand of the stocks along with their valuation. The market indexes often represent a fraction of the stocks and indicate the overall condition of the market.

Terms associated with the stock market

The foremost thing that you must do is understand the terms associated with the stock market. It will give you an idea about the ongoings of the industry. Moreover, it can also help you to make well-informed trading decisions.

Take a look at some of the phrases and words that have special connotations in the stock market.

· Going public: The term is used when a specific business organization decides to make its stocks available to the public.

· Initial Public Offering (IPO): It is the first time that a company sells the stocks.

· Earnings per share: It is basically the total amount of profit that the business makes per share available.

· Trend: The trend is actually the movement of the stock market. For example, if the stock price falls, then the stock market exhibits a downward trend. However, if the prices go up, then there is an upward trend in the market.

· Portfolio: It is the assemblage of investments that an investor accumulates over time. Some may have few stocks, while others can have a diversified range of securities.

· Bull market: It is the market condition in which the price rates of the stock increase exponentially. In such cases, more trading occurs, and as a result, the economy flourishes.

· Bear market: It is the stock market condition when the value of the stocks decreases by 20%. Here, few tradings occur, and the economy disrupts.

· Underwriter: These are the financial institutions that handle the paperwork and other procedures related to the IPO of the firm.

Why do business organizations sell stocks?

Now, the secret behind the financial successes of every giant corporation is similar. They all gathered their much required capital by selling stocks. As the company grows in size and wishes to expand, financial restraints seem like the biggest obstacle. There are various cases where lack of funds was the major reason the firm couldn't expand its reach.

In such a scenario, business organizations either opt for a loan from the bank or sell stocks. The aspect of taking a loan is lengthy, complicated, and difficult. Moreover, you also have to think about debts, balance sheets, etc.

However, if the company goes public and makes some of its shares available, it can quickly collect the capital needed.

Purpose of the stock market

There are dual purposes of the stock market. They help both the business organizations and the individual investors.

Firstly, the stock market offers the opportunity to companies to gain access to private capital. It means that they do not have to take loans and worry about the debts and interest rates. Moreover, they can amass a substantial amount required when they make their shares available to the public for a specific value.

Secondly, when these shares are purchased by investors, they do so to increase their overall net worth. Over the years, the price of the shares can increase. The investors can then sell these and gain a huge amount of profit.

A look into the process of stock issuance

company. Firstly, the company has to make the decision of selling some shares. This directly ties with the amount of capital they need. However, in most cases, business organizations choose to retain control over the company even after the selling of the shares. So, they sell a minority of the total shares. More information on the best stock friendly apps can be found on

After the research the capital they need, they get in touch with a suitable underwriter. These are investment banks that take note of the financial statements. Then, they assess various other factors and determine the price of each share. After the price is set, all other formalities are conducted.

Then, the company is listed on a particular stock exchange. There, investors get the opportunity to purchase the shares. In return, the firm obtains the capital needed. It is why numerous small-sized businesses gain an increase in valuation when they decide to go public.

However, there are various factors that can lead to a decrease or increase in the rice of the stocks. Moreover, human emotions and surroundings also impact the valuations. The basics to being a profitable investor are to identify the shares that have the potential to grow and stockpiling them. With this, you can generate wealth over a long period of time.

Apart from that, you must also know about the various participants in the stock market. These include – insurance companies, individual investors, hedge fund managers, etc.

These are just some of the basic aspects of the stock market. The first step for you is to understand the different terminologies. It will help you to understand the various blogs and videos of the experts. Next, you need to dedicate considerable time to studying the market. After you have got an idea about the trading operation, you can invest and make some profits.

The procedure to issue stocks is lengthy and requires considerable thinking on part of the investor.