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  • Writer's pictureMatt DeLong

What is the simplest explanation of what the stock market is and how it works?

It’s like a big eBay marketplace (bidders/sellers in an auction style) but instead of selling “stuff” — they sell “fractional ownership” (shares) in real companies.


The more people want to own a specific company, the more the “fractional” pieces (shares) are worth. Think of 1 new electronic gadget where alot of people bid on the item on eBay and drive the price higher.


Well known companies like McDonalds, Whole Foods, Starbucks, FedEx, Coke, IBM, PizzaHut/KFC/TacoBell (Yum Brands), Nike, Apple, Tesla, Bank of America, etc are all trading in this market we call the “stock market”. Instead of trading the company names, they are given an abbreviation — which we call a “symbol” or “ticker symbol” ($MCD, $WFM, $SBUX, $FDX, $KO, $IBM, $YUM, $NKE, $AAPL, $TSLA, Bank of America, etc).


Buy/sell orders flow in by the TRILLIONS OF DOLLARS each day. There are hundreds of these markets in the world and companies decide which market they want to trade on. The 2 popular markets in the USA are Nasdaq & NYSE. You can open a “brokerage account” (Google it for 100+ options) to place buy/sell orders in a specific market.


If you buy a stock for $25/share and it climbs to $35/share, you have made a $10 profit. If you buy a stock for $25/share and it goes to $15/share, you have a $10 loss.



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