How does the stock market work?

To understand the basics of the stock market, you need to know what the stock price is. The value or price of a share represents the price at which the asset trades in the market. It depends on the lowest amount a seller agrees to sell and the highest amount a buyer is willing to pay to obtain it. To master the stock market, you need to know about financing projects, financial market players and financial development.

The stock exchange, a meeting place between buyers and sellers

The stock exchange is an activity where you can find several players in the financial market. As is the case for a traditional market where consumers meet traders, the stock exchange is a market where listed companies will meet investors. This place allows buyers to meet the sellers directly and continuously during each trading session.

In concrete terms, a stock exchange transaction takes place when a buyer and a seller agree on the cost of trading one or more shares. This represents a financing project composed of a share of the company’s capital that changes hands. During the Paris stock exchange, the ordinary session represents an average volume traded of around €5 billion per day.

Participate in the financial development of the stock market

To participate in the financial project which consists of stock market trading, it will be necessary to open a special account first. The creation of a securities account or Equity Savings Plan (PEA) authorizes its holder to start acquiring or selling securities. Securities accounts and PEAs each have their own advantages, limits and taxes. If the financial market player wishes to access all types of securities present in all French and international markets such as bonds, shares, funds, etc., it is better to subscribe to a securities account.

With a PEA, the trader will only have access to certain French and European funds and shares. The latter solution is interesting if you are willing to invest for the long term since capital gains are tax-free if you can keep 5 years without withdrawing money.

Various factors that can cause the value of a share to fluctuate

The stock exchange price or quotation represents the equilibrium amount of a share determined at the time of a meeting of the offers to sell and the offers to purchase. Several factors influence the evolution of a stock price. Among the elements likely to cause the value of a security to fluctuate are: the financial results of the company issuing the security, the upward or downward revision of the company’s profit forecasts, various announcements by the company, changes in the cost of raw materials and/or currencies, etc.

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