What is the Stock market? In simple terms it is place where you buy and sell stocks and shares. It is where the trading in securities is managed. It has become a major driver to the market economy as it provides business access to investors and their capitol. The investors risk their capitol for the chance of profit based on the future performance of the companies they invest in. In the USA there are 3 central stock markets some times called stock exchanges.

The NASDAQ stock market, which was created in 1971, was the first electronic stock market in the world. NASDAQ stands for, National Association Of Security Dealers Automated Quotation and is located through a telecommunications network. In other words there is not an actual physical place where you are able to see NASDAQ because it's connected electronically to the companies it represents.

The NYSE stock market, which stands for New York Stock Exchange, is a corporation operated by a board of directors. The board of directors is responsible for listing securities along with setting policies and supervising their members' activities. The NYSE uses floor traders; people that is, to make trades unlike other stock exchanges that typically use computers to make their trade transactions.

The AMEX or American Stock Market is the final one of the big 3 in the USA; it processes approximately 10% of the securities traded in the USA.

Stock exchanges also process what is called "over the counter markets" or OTC; this is also know as the Equity Market. These are the listing of small companies stocks. In the USA there are two OTC exchanges; they are the "Pink Sheets" and the "OTCBB" or Over the Counter Bulletin Board. This is where companies who are not traded by the big 3 are managed.

These markets give the opportunity to investors to own shares in publicly traded companies. They provide 2 ways to profit from the markets; through dividends or capitol gains.

Capital gain means that there is an increase in the companies' capital assets, such as an increase in their real estate value or an investment they have made. Thus in return gives them a higher worth than their original purchase price within the stock market. This will make the value of each share increase including the share or shares that you have bought.

A dividend is a payment of part of the company's profits; this is decided on by the board of directors. The set the level of divided to be paid out per share; the more shares owned the more return the investor receives.

Being a shareholder you become one of the many owners of a company. This gives you the right to a claim on all the company owns. You are entitled to a share in the company profits as well as the right to vote dependant if the stocks you have purchased through the stack market have voting rights included. The more stocks you own the more of the company you own and the more you can earn from the companies earnings.

There are 2 types of shares an investor can purchase; Common and Preferred shares. A common share has little preference with a company; for example should they decide to go into liquidation or become bankrupt the owners of common shares will not receive any capitol back until the creditors and preferred share holders are paid. Preferred share holders have this benefit however they do not have voting rights.

Trying to understand the stock market appears to be extremely difficult and yes it does take some time to understand. If you break the aspects of the stock market down into sections and study them one at a time you just may find its not as complicated as it may seem. The stock market can be complicated but if you're a beginner just take it one step at a time it really isn't as difficult as it appears.