The Stock Market

When people say, “The stock market is up,” it sounds like the market is a single entity. The stock market is simply a system that allows people to buy and sell their stocks.

A stock exchange, such as the New York Stock Exchange (NYSE) or Nasdaq, is where trading takes place. NYSE’s role is to provide the rules, security, and technology to enable trades to happen fairly and efficiently. When you buy a share, the exchange ensures that the seller delivers the stock and receives payment.

How Stock Prices Are Determined: Stock prices are not fixed. They change constantly based on demand and supply conditions through a process involving two prices:

• The “bid” is the highest price a buyer is willing to pay.
• The “ask” is the lowest price a seller is willing to accept.

The resulting stock price is the price at which a buyer and a seller agree. If buyers raise their bids or sellers lower their asks, the price moves.

Stock prices are driven by demand and supply movements. When there are more buyers than sellers, prices rise; and when there are more sellers than buyers, prices fall. Demand and supply in the market will change as buyers and sellers process new information.