Share Market Overview

By: EconomyWatch   Date: 23 November 2010

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Share Market Overview would give an overall idea about the share market, its participants, types, etc.
Share market is the market for securities where organized issuance and trading of shares takes place. It plays an important role in channelizing capital from the investors to the business houses which consequently leads to the availability of funds for business expansion.

Shares are certificates which represents ownership rights of the holder in a company.

Shares in the Share Market are either traded through :-

(a) Stock Exchange These are organized market places where stocks, bonds are other equivalents are traded between the buyers and sellers where exchange acts as a counter-party to both the participants in case of any default.

(b) Over-the -Counter (OTC)These are not centralized exchanges and the trade takes place through a network of dealers.

Basically, Share Market can be divided into two parts :-

1.Primary MarketIt is the market where new issues of securities are offered to the investors.2.Secondary MarketAn investor of a secondary market buys a security from another participant of the same and not from any issuing corporation (as in case of Primary Market).

Generally, stocks are of two types :-

a)Common Stock
It gives an ownership right to the holders of the stock. The holders are entitled to receive dividends whenever the company announces.

b)Preferred Stock
These stocks also give ownership right to its holders. Its holders enjoy the privilege of receiving dividends from the company in preference to any other common share holders. Constituents of Share Market are :-

Buyer

An investor who buys a script in the belief that the market will rise. If his hinge becomes right then he makes profit otherwise he suffers loss.

Seller

Seller of a stock sells in the hope that the stock price will go down.

Stock Broker

Brokers are persons or firms who execute buy/sell order on behalf of the investors and charge a commission for rendering the service.

Share Broking Company offers two types of share trading facilities :-

(a) Offline Share Trading In this form of trading the customer has to place order to the dealer of the stock broking firm either in person or over phone.

(b) Online Share TradingThe client could place his order on his own from any place he wants, provided he has a computer with an Internet connection.

There are mainly two types of trading :-

1.Intra day trading

They buy and sell stocks during the same day.

Intra day Traders are of two types :-

i.Scalp TradersInvestors who perform many trades per day for scalping out small profits out of the bid-ask spread from each trade are known as scalp traders.

ii.Momentum TradersInvestors who pounce on those stocks which move significantly in one direction and book desired profit are called momentum traders. They do this within a day.

2.Delivery trading

The investor buys the share for holding purposes.

Delivery Traders are :-

i. Technical TradersThey believe that buying/selling signals are present within the graphs and charts of the stock.

ii. Fundamental TradersThey perform trade on the basis of study of fact-sheets of the company like historical profit graph, balance sheet, anticipated earning reports, stock splits, mergers and acquisitions, etc.

iii.Swing Traders

They are basically fundamental traders who take delivery of trades for a span of short period generally more than one day.


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