How does the stock market work? Who decides the price of stocks?

Posted by NCCPL on January 28th, 2021

How does the stock market work? Who decides the price of stocks?

Many of the people who are new to the world of stock trading find it really difficult to cope with the novel terminologies and the complex ways of the market. It becomes exceedingly arduous at times to understand the length and breadth of a particular share so that proper investment can be done through an informed decision. In order to counter this dilemma, one needs to obtain ample knowledge of the stock market, and for that, he/she needs to understand the basics of stock trading in pakistan.

How the stock market works

So for those of you who don’t know, the stock market is a place where all sorts of companies list their shares for public interaction through which the public can buy and sell. As someone who is investing, there are a lot of options to make their choice because there are a ton of different companies offering their shares and each investment helps the investor strengthen their investment portfolio.

Price of Stock

Each share has a price that is bound to fluctuate with each day or even second. The stability of the market and opening indexes play an important role in determining the prices of stocks or shares. All of these prices are timely listed and updated on the stock exchange for people to buy and sell shares of their choice.

The logic behind valuation and decision on pricing

With each share that you buy, your portfolio of stock investment is built based upon company, sector, the capacity of Risk, expected returns, tolerance of risk, payouts, and considerations according to stock market preferences. When you have purchased shares of a company you become a shareholder in that company which makes you eligible for payouts, bonuses, and other dividends associated with that company, which simply put means that the company’s profit is your profit and the company’s loss is your disadvantage.

There is no single factor for the valuation of stocks or pricing of stocks as these prices are driven by demand and supply. The latest price on which any stock is purchase becomes the new market price for that particular stock and that happens through the process of buying and purchasing.

For more:

How finance works? A Small Guide But Effective

How do I start investing in the stock market as a beginner?

What is the right time to invest in stock market?

Like it? Share it!


About the Author

Joined: January 20th, 2021
Articles Posted: 7

More by this author