What is the stock market? How does it work?

Do you invest in the stock market? Oh, you are unaware of stock market trading. But you might have come across the word ‘stock market,’ right? In this blog, let’s briefly discuss and understand the stock market and how it works.

A stock market is also known as a share market or equity market; it is the aggregation of the sellers and the buyers of stocks generally representing ownership claims on that particular business. In other words, you can understand the stock market as exchanges and markets where equity shares are traded.

Mainly there are two types of stocks: preferred shares and common shares.

History of the stock market

Do you know about the history of the stock market? The stock market history can be traced back to the 12th century in France; the debts of the communities like agriculture were concerned and managed by the courtiers de change. These men can be called the first brokers as they traded with debts.

In the Burges during the late 13th century, several commodity traders gathered at a market square that contained Van der Beurze; In 1409, these people became the Brugse Bearse, which had been an informal meeting till then.

What is the stock market? How does it work?

This idea spread across the neighbouring countries, and soon Beurzen was opened. Since the early 13th century, the place for the stock market can be understood and seen. In the middle of the 13th century, Venetian bankers started to trade in government security. Soon, in the 14th century, the bankers in Florence, Pisa, Genoa, and Verona also began to trade in government securities.

During the 16th century, the companies in England, as well as the low countries, followed. At this time, a joint stock company emerged, which became important for colonisation. In 1602, the Dutch East India company was founded.

In today’s era, you can find the stock market almost everywhere. The largest markets in the world can be found in India, the United States, Canada, the United Kingdom, Germany, Japan, France, China, the Netherlands, and South Korea.

Also Read: Share market tips for first-time investors

Sectors of the stock market

Now that you have understood the stock market and its history, it is very important to know the different sectors of the stock market. Stock is usually broken down into different businesses, so let’s understand those basic categories in stock market sectors.

Communication services

Under this stock market sector, you will be able to find companies related to media & entertainment, the internet, and telephone.


Gas station operators, pipeline providers, oil and gas exploration, and many such companies fall into this stock market sector.


Drug and biotech companies, health insurers, and medical device-making companies follow the healthcare sector.

MUST READ : How To Invest In Share Market In India: A Beginners Guide


Companies and authorities like insurance and brokerage, mortgage finance specialists, and Banks are covered in the financial sector of the stock market.

Consumer staples

Beverages, food, tobacco, personal, and household products are categorised into consumer staples.

Consumer discretionary

The automakers, retailers, restaurants and hotels lie in the Consumer discretionary sector.


The companies that provide you with natural gas, electricity, renewable energy, water and other such stuff are a part of the utility sector in the stock market.


You can find IT services companies, hardware, semiconductor, software and communications equipment in this sector.


Railroad companies, airlines, logistics, aerospace and defence, machinery and construction come under the industrial sector.

Real estate

Real estate development and management companies, and real estate investment trusts fall into this category.


You can find chemical companies, mining, packaging, forest products, and construction materials in this sector.

How does the stock market work?

The working of stock market is very organised, and it begins with listing a particular company in the primary market. This takes place through IPO, which stands for Initial Public Offering. Once this step is done, then, in the secondary market, the shares are traded and distributed by the investors. The brokers of the stock market and the brokerage firms work as an intermediary between the stock exchange and you as an investor.

Now the time arrives when the broker passes your buy order to the exchange in search of a sell order of the same share. After this step, a price is agreed upon when a buyer and seller are fixed. Then the confirmation information is passed on by the exchange to your broker.


The stock market has existed for a very long time, but in today’s world, the craze for the stock market and trading has risen. Several courses are offered for stock market trading, and one can enjoy several benefits from investing in the stock market.

In the last few years, it has been found that people of all ages are getting involved in the stock market as it’s one of the easiest but most technical methods of earning money in a shorter period. Before investing in the stock market, one needs to have a piece of great knowledge and command of its understanding, or it is better to ask for an expert’s suggestion.


1)What are the benefits of stock market trading?

There are several advantages of stock market trading, and some of them are mentioned below.

  • Saves money
  • Make extra money
  • Liquidity
  • Short-term investment with higher returns
  • Flexible
  • Easy
  • Safe and well protected

2)What is SEBI in the stock market?

India’s stock market is regulated by SEBI, the Stock Exchange Board of India.

3)Can you learn Stock market trading?

You can learn stock market trading online and offline as well. Several courses are specially designed to teach people of all age groups about stock market trading.

4)Name some of the best institutes for stock market trading courses?

Some of the best places to learn stock market trading are NIFTY, NSE Academy, BSE Academy, NISM, and NIFM.

5)Is it good to invest in the stock market?

Yes, investing in a share is a great idea, but if you have knowledge about this field and a high tolerance for taking risks. Because the stock market is not as easy as it seems, you need to research, analyse, and then plan to invest in the stock market.

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