The stock market works through a network of exchanges -- you may have heard of the New York Stock Exchange or the Nasdaq. Companies list shares of their stock on an exchange through a process called an Initial Public Offering, or IPO. Investors buy those shares, which allows the company to raise money to grow its business. Investors can then buy and sell these stocks among themselves, and the exchange tracks the supply and demand of each listed stock.

That supply and demand help determine the price for each security, or the levels at which stock market participants -- investors and traders -- are willing to buy or sell.

Computer algorithms generally do most of those calculations. Buyers offer a “bid,” or a price they’re willing to pay for a security, and sellers ask for a “ask price,” or a price they’re willing to sell a security. (And those are the “bid” and “ask” prices you see when you place a trade.)

The difference between those prices is the “bid-ask spread.” If a bid is $200 and the ask is $202, the bid-ask spread will be $2.

When a bid and an ask coincide, a trade is made. That’s a simplified overview of how the stock market works, and it gets a lot more complicated once you start digging into the nitty-gritty -- but hopefully, you now have a better understanding of the basics.

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The stock market works through a network of exchanges -- you may have heard of the New York Stock Exchange or the Nasdaq. Companies list shares of their stock on an exchange through a process called an Initial Public Offering, or IPO. Investors buy those shares, which allows the company to raise money to grow its business. Investors can then buy and sell these stocks among themselves, and the exchange tracks the supply and demand of each listed stock.

That supply and demand help determine the price for each security, or the levels at which stock market participants -- investors and traders -- are willing to buy or sell.

Computer algorithms generally do most of those calculations. Buyers offer a “bid,” or a price they’re willing to pay for a security, and sellers ask for a “ask price,” or a price they’re willing to sell a security. (And those are the “bid” and “ask” prices you see when you place a trade.)

The difference between those prices is the “bid-ask spread.” If a bid is $200 and the ask is $202, the bid-ask spread will be $2.

When a bid and an ask coincide, a trade is made. That’s a simplified overview of how the stock market works, and it gets a lot more complicated once you start digging into the nitty-gritty -- but hopefully, you now have a better understanding of the basics.

Knowee AI · Accepted Answer

The stock market works through a network of exchanges -- you may have heard of the New York Stock Exchange or the Nasdaq. Companies list shares of their stock on an exchange through a process called an Initial Public Offering, or IPO. Investors buy those shares, which allows the company to raise money to grow its business. Investors can then buy and sell these stocks among themselves, and the exchange tracks the supply and demand of each listed stock.

That supply and demand help determine the price for each security, or the levels at which stock market participants -- investors and traders -- are willing to buy or sell.

Computer algorithms generally do most of those calculations. Buyers offer a “bid,” or a price they’re willing to pay for a security, and sellers ask for a “ask price,” or a price they’re willing to sell a security. (And those are the “bid” and “ask” prices you see when you place a trade.)

The difference between those prices is the “bid-ask spread.” If a bid is $200 and the ask is $202, the bid-ask spread will be $2.

When a bid and an ask coincide, a trade is made. That’s a simplified overview of how the stock market works, and it gets a lot more complicated once you start digging into the nitty-gritty -- but hopefully, you now have a better understanding of the basics.

How does the stock market work?

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