Can someone explain to me how the stock market works?

Question

I guess i just havn't caught onto why and how it is so integrated into everything.

Answer 1

Buying a stock is buying into a part of the future of that company.  If it does better from there out the stock goes up and visa versa.  All the traders are just betting on weather or not certain big companies are going to do better or worse in the future.

It's not integrated into as much as you might think, but you have to understand that business is the driving force in our national and global economy and when the best minds are betting that it's all going to be doing worse then there is cause for concern.  It's really just more of a good indicator of where things are going.

Answer 2

The stock market is a huge gathering of people. The Price of any stock is nothing more than a momentary consensus of value assigned to a stock by the act of buying or selling a stock. The principles of supply and demand are responsible for most of the movement in a stock price. If at some point more people want to buy a certain stock the price has to go up to accommodate the demand. If at some point more people want to sell a stock then price has to go down to accommodate the supply. Just think of ebay, whenever a lot of people want one particular item you know the bids will run high because there are so many people who want it. If John is willing to pay $100 Randy is willing to pay a measly dollar more for a chance to win the item. On ebay the urgency to bid comes from the potential to lose the item if you don't bid. In the stock market the urgency to buy comes from the fear that you are missing out on a good price if you believe the intrinsic value of a stock is actually higher than the current price. In summary, the stock market is nothing more than a large market of money changing hands from the pockets of the uninformed and into the pockets of the well informed.

Answer 3

The price of a stock in a stock market is what people perceive as a fair price based on the expectation they have on the company.

If they feel that it is overprice, they will short (sell) the stock, or if they feel that it is under fair price, they will long (buy) the stock.  Of course, at any time, some people will feel that it is overprice and some will feel underprice.

Price will go up if the quantity to buy is more than the quantity to sell and vice versa.