Equity Market - Deepstash
Equity Market

Equity Market

An equity market is a market in which shares of companies are issued and traded, either through exchanges or over-the-counter markets. Also known as the stock market, it is one of the most vital areas of a market economy. It gives companies access to capital to grow their business, and investors a piece of ownership in a company with the potential to realize gains in their investment based on the company's future performance. 

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Trading in an Equity Market

In the equity market, investors bid for stocks by offering a certain price, and sellers ask for a specific price. When these two prices match, a sale occurs. Often, there are many investors bidding on the same stock. When this occurs, the first investor to place the bid is the first to get the stock. When a buyer will pay any price for the stock, they are buying at market value; similarly, when a seller will take any price for the stock, they are selling at market .

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Understanding an Equity Market

Equity markets are the meeting point for buyers and sellers of stocks. The securities traded in the equity market can either be public stocks, which are those listed on the stock exchange, or privately traded stocks.

When companies are born they are private companies, and after a certain time, they go through an initial public offering (IPO), which is a process that turns them into public companies traded on a stock exchange. Private stocks operate slightly differently as they are only offered to employees and certain investors.

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Stock Exchanges

Stock exchanges can be either physical places or virtual gathering spots. Nasdaq is an example of a virtual trading post, in which stocks are traded electronically through a network of computers. Electronic trading posts are becoming more common and a preferred method of trading over physical exchanges.

The New York Stock Exchange (NYSE) on Wall Street is a famous example of a physical stock exchange; however, there is also the option to trade in online exchanges from that location, so it is technically a hybrid market.

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Stock exchanges can be either physical places or virtual gathering spots. Nasdaq is an example of a virtual trading post, in which stocks are traded electronically through a network of computers. Electronic trading posts are becoming more common and a preferred method of trading over physical exchanges.

The New York Stock Exchange (NYSE) on Wall Street is a famous example of a physical stock exchange; however, there is also the option to trade in online exchanges from that location, so it is technically a hybrid market.

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Initial Public Offering (IPO)

An Initial Public Offering (IPO) is the process where a private company becomes listed on a public stock exchange and offers new shares.

Prior to an IPO, the company is private and shares are usually held by the founder, early employees, VC firms, and angel investors.

An IPO is a great way for a business to raise money by allowing public investors to invest in the business for the first time.

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Penny Stocks

Penny stocks are a form of market traded security which attracts minimal pricing. These securities are mostly offered by companies with lower market capitalisation rates. Therefore, these are also called nano-cap stocks, micro-cap stocks, and small-cap stocks, depending on the company’s market capitalisation.

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Nasdaq overview

The Nasdaq (National Association of Securities Dealers Automated Quotations) is the oldest and largest electronic stock market globally. All its buying and selling occurs electronically and not on a physical trading floor.

It is the second-largest stock exchange globally based on the market capitalisation of its listed companies.

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