The document explains the workings of the stock market, describing stocks as financial instruments representing ownership in companies and detailing the role of stock exchanges in facilitating trading. It outlines how share prices are determined through an auction process based on supply and demand, and offers tips for successful long-term investing and intraday trading strategies. Key principles include risk management through diversification, research, and disciplined investment strategies.

1. How Does
Stock Market
Works ?
GULSHANKUMAR S
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21. Companies are under the unavoidable
influence of market factors-
1. Price of Materials
2. Changes in Technology
3. Costs of labour
4. Changes in Leadership
5. Larger Factors

23. STOCK
A stock or share is a financial instrument that represents ownership
in a company or corporation and represents a proportionate claim
on its assets and earnings.

24. Stock Exchange
Stock Exchange is a marketplace, where securities can be
freely traded between investors with the help of members i.e.
brokers. It is a great platform for purchasing and selling securities,
debt and derivatives. It is a key indicator of financial strength of the
country’s economy. In India, there are two major stock exchanges,
Bombay Stock Exchange, and National stock exchange.

25. Reason behind listing company’s
shares
When a company establishes itself, it may need access to much
larger amounts of capital than it can get from ongoing operations or
a traditional bank loan. It can do so by selling shares to the public
through an initial public offering (IPO). This changes the status of
the company from a private firm whose shares are held by a few
shareholders to a publicly traded company whose shares will be
held by numerous members of the general public.

26. How Share Price is set
The prices of shares on a stock market can be set in a number of ways,
but most the most common way is through an auction process where
buyers and sellers place bids and offers to buy or sell. A bid is the price at
which somebody wishes to buy, and an offer (or ask) is the price at which
somebody wishes to sell. When the bid and ask coincide, a trade is
made.

28. Trend up and Trend down
For every stock transaction, there must be a buyer and a seller. Because
of the immutable laws of supply and demand, if there are more buyers for
a specific stock than there are sellers of it, the stock price will trend up.
Conversely, if there are more sellers of the stock than buyers, the price
will trend down.

30. Tips for a good long term trading
1. Know what you are buying?
2. Know the level of risk you are undertaking
3. Diversification – a golden rule
The golden rule to manage risk is to diversify your investment in different stocks

31. Intraday Trading
Commonly intraday trading or day trading is refers to buying and selling of stocks
during the trading hours of a given day.
Let us take an Example. Consider I bought a 100 stocks of Gulshan Polyols for
Rs.150 on Sept 15 2020 and sold at Rs. 175 at the same day before the closing of
the market.
Thus I made Rs.2500 as intraday profit with Rs.25 profit per share.

32. 7 Basic Rules for Trading in Intraday
1.Timing the Market
2. Plan Investment Strategy and Stick with it
3. Exiting the Position
4. Invest Small Amounts that Won’t Pinch
5. Research
6. Close the Open Position
7. Spend Time

33. Tips for Intraday Trading
1. Select the right stock
2. Know the entry and exit price
3. Always set a stop loss level
4. Close the open position after reaching your target profit
5. Do not challenge the market and don’t be too much greedy.