What is stock market in detail? How does Pakistan stock market work?

What is stock market in detail:

The stock market, which is often referred to as the equity market or share market, is a controlled marketplace where people and organizations can purchase and sell ownership shares in publicly traded corporations. These shares, which are traded on exchanges or over-the-counter (OTC) marketplaces, reflect ownership stakes in the companies. The stock market provides a variety of functions and is essential to the economy. Now let’s get into the specifics:

1. Function and purpose:

Capital Formation: By selling shares to investors on the stock market, companies can raise money. This money is utilized for corporate expansion, R&D, acquisitions, and other endeavors.

Investment Opportunity: Shares in firms are available for purchase, allowing investors to own a piece of the company and maybe profit from its expansion and success.

The stock market offers liquidity, making it simple for investors to buy or sell shares and, if necessary, quickly turn their investments into cash.

2. Participants:

Businesses (Issuers): Businesses raise money by selling shares in an Initial Public Offering (IPO) to the general public.

Investors (Traders and Investors): People, organizations, and funds that purchase and sell shares of corporations for a variety of reasons, such as capital growth, dividend income, or speculation.

Brokers and brokerage firms are the middlemen who make it easier for investors and businesses to acquire and sell stocks.

Exchanges: Centralized marketplaces for the trading of equities.

Two examples are the NASDAQ and the New York Stock Exchange (NYSE).

3. Stocks & Shares:

Stocks (Equities): A claim on a portion of a company’s assets and earnings represented by ownership shares in the company.

Shares: Individual ownership interests in a corporation.

When you purchase shares, you acquire a proportionate share in the company based on the number of shares.

4. Indexes of the stock market Indices:

These statistical measurements are used to assess the performance of the market as a whole or of a particular market segment. The S&P 500, Dow Jones Industrial Average, and NASDAQ Composite are among examples.

5. Trading Systems:

In an auction market, trades take happen when the bid and ask prices are in agreement.

Market makers are people or companies who make trading easier by guaranteeing that there is always a market for particular equities and by supplying liquidity.

6. Trading Hours:

The typical trading hours for the stock market in the United States are from 9:30 AM to 4:00 PM EST. On the other hand, pre-market and after-hours trading allow trading before and after regular business hours.

7. Factors Affecting Stock Prices:

Supply-demand dynamics, geopolitical events, market mood, firm performance, and economic indicators are just a few of the variables that affect stock prices.

8. Order Types:

A market order is a request to purchase or sell stock right away at the going rate.
A request to purchase or sell a stock after the price reaches a certain level is known as a stop order.

9. Risks and Volatility:

Stock markets can be risky, and prices can change depending on a variety of variables, potentially resulting in gains or losses for investors.

The stock market is a crucial feature of the global financial system because it gives businesses a way to raise funds and allows investors to get involved in their expansion and success. However, stock market participation comes with hazards, so people should do extensive study, think carefully about their financial objectives, and assess their risk tolerance.

How does Pakistan stock market work:

The Pakistan Stock Exchange (PSX) is the principal stock exchange in Pakistan where investors can purchase and sell shares of publicly traded companies. It provides a platform for businesses to obtain funds and for investors to invest in these businesses, which is essential to the economy of the nation.

Below is a summary of the Pakistan stock market:

Market Structure: The Pakistan Stock Exchange (PSX), the main stock exchange for the nation, was formed by the merger of the Karachi Stock Exchange (KSE), Lahore Stock Exchange (LSE), and Islamabad Stock Exchange (ISE).

A controlled and regulated market where buyers and sellers trade stocks is called the PSX.

Brokers and brokerage firms are participants in the transaction since they act as middlemen for investors buying and selling equities. To trade on the PSX, investors need to open brokerage accounts.
Investors include private buyers and sellers of shares as well as institutional and overseas buyers and sellers.

Publicly traded businesses that have issued shares for trading on the PSX in order to raise money are known as issuers.
Listed Companies: Businesses that want to go public offer shares to the general public through an Initial Public Offering (IPO).

Following the IPO, the company’s shares are listed on the PSX and are available for trading by investors.

 Business Hours: On Monday through Friday, the PSX’s regular trading hours are from 9:30 AM to 3:30 PM (Pakistan Standard Time).

The PSX operates in a controlled environment to preserve market stability, guarantee ethical trading, and promote investment. Before investing in Pakistani equities, investors should do extensive research, keep up with market movements, think about their financial objectives, and their risk tolerance.