How financial markets work

A market brings buyers and sellers together. A stock market does this for ownership stakes in companies, with exchanges providing the rules and infrastructure through which orders are matched.

Shares and ownership

A share represents a small ownership interest in a company. Public companies make shares available to investors, and those shares can later be bought and sold between market participants.

Why prices move

Prices change when the balance between willing buyers and sellers changes. Company results, expectations, interest rates, economic news, industry conditions and investor behaviour can all alter that balance.

Orders and liquidity

A market order prioritises execution, while a limit order specifies the worst price a buyer or seller is willing to accept. Liquidity describes how easily an asset can be traded without causing a large price change.

Indices

Indices such as the S&P 500 or FTSE 100 track groups of companies. They are useful for describing broad market performance and comparing the performance of individual companies with a wider benchmark.

Next: learn how the companies behind those shares report their financial performance.