Have you ever observed the Stock dealer’s screen having market operators glued to it with anxious, anticipating glances? The screen shows rows of figures in a dynamic state, changing instantaneously. Now, to analyze these figures closely, let’s go back to the definition of “market”. A market is a place where the sellers of a product (or service) and its buyers converge. The market forces of demand and supply determine the price at which the trades are affected i.e. the price at which the sellers are willing to sell the product and the buyers are willing to buy the product.
Similarly, the Stock Market is the place where the sellers and buyers of shares of companies trade and the same forces of demand and supply determine the price of trade. The share market provides an electronic platform, unlike the normal markets where the buyers and sellers are known.
The orders are placed and executed electronically through a stock exchange which gives its dealers electronic platforms to place bids to buy and sell. The stock exchange server maintains an order book for all the orders that its members place (whether buy or sell). The software determines the price of a stock based upon the demand and supply. Here is a simplistic example of how this is achieved. The stock of Company A is currently trading at .7800.
