A stock market, equities market, or share exchange is an establishment where investors may buy and sell shares of stock in a company. The price of a share of stock is determined by supply and demand, which are influenced by factors such as company performance, industry classification, investment style, and sector preference. These may also include securities listed on a publicly traded stock exchange, which are traded in an electronic way on a securities exchange. However, a stock market can also be a private inter-bank market or exchange.
Investors use shares of the stock market to take advantage of fluctuations in the value of a particular company. This also gives an opportunity for large-scale investors to enter the market. Usually, shares of the stock market are bought and sold on a daily basis, with traders buying and selling thousands of shares at any given time. Some investors use derivatives such as futures and options to manipulate the value of the shares of stock, and/or other financial instruments such as forward contracts to speculate on the behavior of underlying securities.
One type of investment in the stock market involves a trading strategy known as Dollar Cost Averaging. This is based on the Dow Theory, named after Dow Jones, who developed the technique of using opening and closing prices to identify potential breakout stocks. Dow Jones developed this technique to help investors focus on “hot” stocks. Another popular strategy of buying and selling the same stocks multiple times is called price action. Both these strategies are used by institutional investors and everyday day traders.