Debunking The Stock Market Witchcraft or Wizardry
By Lawal Abdulmalik
Taking a closer look at the different markets out there 🕵♀
A stock market a.k.a a share market, involves the coming together of buyers and sellers of stocks, involving no physical facility and meeting.
A company or investment can be owned by more than 2 investors, and by investing in the company’s shares, you can buy yourself ownership of a part of the company. Any profit, losses or dividends that the company earns will be shared amongst you and the other investors in a pre-agreed ratio or investment ratio.
You must have also heard about the FOREX market. The FOREX market is very similar to the stock market, but rather than stocks, they trade currency pairs and other commodities like cryptocurrency.
Since buyers and sellers of stocks need not meet, investment in the stock market is done through stock brokerages or electronic platforms. You as a buyer, are only required to be aware of the investment strategy guiding your investment portfolio.
It is usually the stock markets’ intensely complex structure that makes its mechanism seem like such Witchcraft from a layman’s point of view.
How big are these markets? 😯
As for the size of stock markets, there are 60 stock exchanges in the world with the United States stock exchange being the largest, amounting to 34% of the global stock market, followed by Japan and UK stock exchanges at about 6% of the global market.
16 of these 60 stock exchanges are worth $1 trillion. These 16 exchanges are spread across the Asian, North American and European securities exchanges and are in total, worth more than $70.75 trillion!
So what happens in a stock market? 🤷♀
IPOs 🗣
IPOs i.e. initial public offerings, is a means companies use to introduce and sell their stocks on a stock exchange to raise capital and in effect, contribute to public growth.
Issued securities 👩⚖
Only issued securities that have fulfilled certain terms and conditions as prescribed by the stock exchange are permitted for listing and trade. Here’s an example of the terms and conditions the Dubai Financial Market requires for its securities.
The market is well-regulated and organized 💂♀
The stock market is an organized market with a management committee that has the right to manage and control all transactions being carried on the stock market. The management committee enforces rules and bye-laws on the traders that they must adhere to for a free flowing mechanism.
Membership restriction 👩💼
To buy or sell securities in a stock market, you must be an authorised member of the stock exchange and have a brokerage account. If you do not want to get a membership and want to participate temporarily, you can create an individual account and avail brokerage services through an employer-sponsored retirement investment fund.
Public company 👮♀
A public company is a company that freely trades its shares among the general public in the stock exchange. For a public company, like Apple, it must first disclose its financial standing and business information so that you, a potential investor, can make an informed investment decision.
Effect of supply and demand 📊
The value/price of a company’s stock will determine the supply and demand for it. The desirability of a company’s stock depends on how the company performed over the years, any recent innovation that screams potential for its future and its reputation in the market.
Prediction 🔮
Stock prediction is when market participants trade news about a particular stock with each other to make a profitable purchase or sale. The traders predict whether the stock’s value will rise or fall based on the general emotion about the particular company in the market and other financial news.
In conclusion, stock trading is not about the witch but the wizardry. It is about how well you can wrap your head around the basics we discussed above and how good you can get at this game with time.
See? It’s worth a shot! 🏌♂
This article is part of the bite-size bundle ‘Wizard of Oz’ on the Finllect app. Find the Finllect app on Appstore today! 💁
