The stock market is a public market where trading of companies stocks at agreed prices takes place. In the US the New York Stock exchange is the largest stock market by market cap. People who invest in the stock markets range from small investors to large institutions. In the stock market today, you find trades taking place from all over the world. You will find two types of stock exchanges where trading stocks take place. There are physical stock exchanges, complete with a trading floor where transactions are done in an auction style, with traders calling out verbal bids and offers. The New York Stock Exchange is a physical exchange.
The other kind of stock exchange is the virtual one. Trades are done through an electronic communication network. The NASDAQ is a virtual exchange where investors trade over a computer network. When you buy one of your stock picks, the order is sent electronically through a network to be executed by a broker.
The stock market is also very important for companies. By selling their stock, they can raise money to help them finance important endeavors. Many investors prefer to place money on the market as it offers liquidity. This is important because it allows you to buy or sell and obtain cash faster, than say real estate. If you were to try and sell property, it would take a number of days, weeks, months or even years until you sell and get liquidity. However, on the stock exchange, you can buy and sell shares immediately, providing there is volume.
When investing on the markets, it is also important to make sure you get in at the right time. Markets have cycles that they follow, and knowledge of which stage it is at can be important. Technical analysis will help you to better time the markets. You may choose to use candlestick charts, moving averages or oscillators as technical indicators. Generally, a stock market has four phases that it will go through. The first phase is the accumulation phase where the market is still generally bearish but has bottomed out. There are very attractive stock prices. This is the ideal time for stock picking, with lots of hot stock tips flying around.
Next is the mark up phase. The market has been stable for a while and stocks are starting to rise. As this phase matures, more investors start picking up stocks. The mood at this stage is going from neutral to bullish.
The distribution phase sees sellers dominate the stock market, bringing stocks down further. It is a confusing time for investors with periods of fear making prices fall, followed by periods of prices rising. The last stage is mark down stage. Where stocks are in steady decline and many investors see losses. This cycle in the stock market will end as it approaches the bottom, starting the cycle all over again.