The stock market is an exciting yet enigmatic place.
On the one hand, it can be a smart decision to put some money into the stock market and watch it grow. On the other hand, it can also be a risky endeavour if you don't know what you're doing.
Not to worry... we've got an easy introduction to the stock market right here!
You'll become a Shokunin of stock trading in no time.
First Things First
What is the "Stock Market"?
The Stock Market is a place where you can buy and sell things; in this case Stocks, aka units of ownership in a company. At a Fish Market for example, you can buy and sell... fish, but you may find yourself having to search for the best catch of the day.
At its core, the stock market is a place where people buy and sell
fish stocks. Think, Warren Buffet venturing to the wet market in search of the perfect tuna for his sushi boat.
The Price of Good Sushi
Fish is one of those foods where you can taste quality. That's why some sushi restaurants have to fight for the best selection of salmon. "How" you ask? They bid for it in advance.
However, not all fushermen are created equal, some are obviously better than others and they charge accordingly. Thus, sushi chefs may be willing to pay a higher price for a salmon from a skilled fisherman vs a not so skiled one.
Stock prices work in the exact same way. Like how a salmon may be more expensive from a seasoned fisherman, a stock price may be higher if a company is performing well.
The value of the
fish stock is based on the skills, experience, and expectations of the fisherman company.
The Secondary Fish Market
But the stock market isn't like a fish market in every way. The fist market is something we would call a "Primary Market", meaning that you buy directly from the source. When companies sell their stock through IPO subscriptions (Initial Public Offerings) or through Bonus Issuance this is a "Primary Market"
The Stock Market, as we interact with it, is a "Secondary Market". This means that you buy stocks from other traders and not the companies themselves.
Imagine that there was a second fish market right next to the first one, but this "Secondary Fish Market" is where Itamae (sushi master-chefs) and home cooks alike can buy and sell fish amongst themselves. These fish were bought from the fishermen earlier that day.
A knowledgable chef can buy a fish they believe to be undervalued and sell it for a higher price for a profit in homes of using this gain to buy a better fish. Everyone is trying to get the best catch of the day for the best price possible. However, at the end of the day the overall value of the fish is based on the repudation, abilities, and expectations of the fisherman that caught it. This is the Stock Market.
The next time you're on our platform feeling a little overwhelmed by the idea of investing, imagine that you are Chef Nobu searching for that perfect tuna on the secondary fish market. Ask yourself "What makes the perfect tuna?"
We hope this explanation helps clear up some of the water around the Stock market and Stock Trading.