What is the stock market?

The stock market is a system that allows investors to buy and sell shares of publicly traded companies. A publicly traded company is a company whose ownership is divided into shares, that are traded by the public.

It is not one physical location. Instead, it includes exchanges, brokers, financial institutions, and millions of investors interacting with one another.

When you hear that "the stock market went up today," people are usually referring to the overall performance of a large group of stocks rather than every single stock.

Stock exchanges are digital marketplaces that allow people to trade shares.
Two major U.S. exchanges are the New York Stock Exchange (NYSE) and Nasdaq.

Companies such as Coca-Cola, Walmart, Apple, Microsoft, and thousands of others have shares that trade on exchanges.

Individual investors are not able to directly send orders to a stock exchange. Instead, they go through a broker or a brokerage.

Brokers are the middlemen between the investor and the market. A brokerage is a company that the brokers work for, which allow investors to buy and sell investments through an account.

When you press the buy button in a brokerage app, the brokerage sends your order into the market, where it can be matched with someone willing to sell.

The brokerage acts as the connection between you and the financial markets.

Imagine a stock is currently trading around $50.

You decide that you want to buy one share. Somewhere else, another investor decides that they are willing to sell one share at an acceptable price.

When the market matches your buy order with their sell order, a trade occurs.

There is always someone on both sides of a completed trade: one buyer and one seller. Most of the time trades happen between two individual investors, not the company themselves. Some examples of when companies directly trade in the market are in share buybacks, and initial public offerings.