What is stock market?

The stock market is a broad term for the network of exchanges, brokerages, and over-the-counter venues where investors buy and sell shares in publicly traded companies. Though people sometimes use "stock market" to refer to the New York Stock Exchange (NYSE) or the Nasdaq, these exchanges are components of a wider global marketplace.

What Are Public Companies?

Not all companies can offer stock to the public. In the U.S., only companies that are registered with the SEC can sell their shares on a public exchange like the NYSE or Nasdaq. These companies must meet stringent regulations and financial disclosure laws.

Stocks: Buying and Selling Shares

When you buy a stock or a share, you're getting a piece of that company. How much of the company you own depends on the number of shares the company has issued and the number of shares you own.

 If it's a small, private company, a single share could represent a large part of the company. Major public companies often have millions, even billions, of shares. For example, Apple Inc. (AAPL) has billions of shares in circulation, so a single share is just a tiny fraction of the company.

 The price of a stock changes based on the demand for shares from new investors who want to buy, or the supply of shares from existing investors who want to sell. Not every investor makes decisions based on the same criteria, and what might seem like a high price to one investor is a bargain to another. This dynamic keeps shares trading hands and makes future prices difficult to predict.

How Stocks are Traded

Most stocks are traded on exchanges such as the New York Stock Exchange (NYSE) or the NASDAQ. Stock exchanges essentially provide the marketplace to facilitate the buying and selling of stocks among investors. Stock exchanges are regulated by government agencies, such as the Securities and Exchange Commission (SEC) in the United States, that oversee the market in order to protect investors from financial fraud and to keep the exchange market functioning smoothly.