The Ultimate Guide to Understanding How the Stock Market Works

Getting into the stock market is like a strategy game, but instead of battling dragons or building empires, your goal is to grow your wealth. The pieces of the stock market game board move in response to factors like news, trends, and even world events. And just like any game, you need to know the rules before you can start winning. 

But if you’re feeling like a noob in the world of investing, fear not! Our guide to how the stock market works will equip you with all the knowledge you need to make calculated moves and come out on top. Then, when you’re ready to level up, reach out to your local credit union, where you’ll find credit union financial advisors who can help you unlock your inner investor! 

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What is the Stock Market?

The stock market goes by many names, including the stock exchange, the share market, and Wall Street. These names refer to groups of buyers and sellers exchanging publicly and privately traded stocks representing shares or stakes in a company. Stocks trade on a global scale, with exchanges located around the world.  

Brokers and traders buy and sell stocks with strategies to maximize returns. When someone purchases a stock, they acquire a small piece of the business. Prices move up and down consistently with changes in company performance, political movements, economic reports, world events, and more. While investments fluctuate, the Securities and Exchange Commission acts like a gamemaster, regulating the U.S. market to protect investors. 

Key Players in the Stock Market

The stock market is busy with many individuals working to make trades and grow investment portfolios. Investing is similar to playing on a team, and it helps to know all the positions before entering the competition. 

Here are the key players in the stock market: 

How Stocks are Traded

Now that you know the players, you can start to plan your moves. Here’s how stocks are traded.


Buying and selling stocks

Stocks can be bought and sold in a variety of ways. Traditionally, you can work with a financial advisor or stockbroker who can help you assess your financial goals and trade on your behalf. You can also do this with online brokers, who work similarly but may offer less personalized attention. Finally, app and robo-advisor trading platforms allow for quick exchanges through an app or web platform, which can work well for experienced day traders.  


Types of stocks

Similarly, the stock exchange has different types of stocks: 

Factors That Affect Stock Prices

Stock prices change every day, sometimes by large amounts! Most often, stocks are affected by the rules of supply and demand. (The more people want it, the more expensive it will be.) 

However, other factors also affect stock prices, including:  

Risks of Investing in the Stock Market

Like anything, the stock market comes with risks. Account for these risk factors when investing your money and determine what you are willing to take on before investing. 

Here are several stock market risk factors to consider: 

Rewards of Investing in the Stock Market

Despite the risks, there are plenty of rewards to reap from investing in the stock market. Here are a few rewards to look forward to: 

Further Resources on How the Stock Market Works

Here are a few more resources on stock market basics to help you start investing in the stock market. 

Stock Up on Investor Knowledge 

Now that you have a basic understanding of how to buy and sell stocks in the stock market, key players, and types of shares, you can begin to level up your investment portfolio. Just remember, the game of wealth can be complex and challenging, even for experienced players. You can stock up on even more knowledge with the help of an experienced financial advisor. Find an advisor near you with our Credit Union Locator.

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Did you know?

Credit unions can provide financial advisory services to their members, helping them prepare investments and expand their portfolios. Unlike large banks, credit unions take a member-focused approach to understand your needs and offer services at an affordable rate.

Find the right Credit Union for you

There are more than 5000 credit unions to choose from across the U.S.