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How do stock markets work?We explain in 3 steps

(Spanish CNN) - In recent days, Wall Street has been in turbulence, and so far there are no signs that indicate when this volatility will yield.

On Monday, the stock markets in the United States culminated the day with slight profits, but most of the day were in negative field;It was not until shortly before the closure that reversed the losses.

The next day, Wall Street continued in Rojos during most of the day, but the Dow offered a ray of hope when it was briefly put in green in the afternoon.

In the midst of this context of volatility and concern of investors, the news related to markets may still sound very distant.

If this is the case, we tell you how the stock markets work and why they are important.


What are the stock markets?

According to Monex, a Mexican company specialized in the financial sector, the stock markets, which are also known as stock exchanges, are the places "where investors buy and sell shares of companies".

And in reality not only covers shares and companies.In the market, “debt or capital instruments” are placed, says the Institutional Stock Exchange (BIVA), among which are shares, bonds, credits, among others.

However, not to do this more complex, we will say that the stock market is where an investor can buy the shares that put an institution or even a person for sale.

¿Cómo funcionan los mercados de valores? Te explicamos en 3 pasos

The action, which we already defined as a debt instrument, is equivalent to a small part of a company (basically, if you acquire an action, buy that small part of the company and expect its value to increase).If it is a government bonus, for example, the investor gives money to said administration, with the promise that it will be paid in the future with interest.

In mercantile jargon, that person who buys an action or other debt instrument is usually called a investor or investor;The institution or third you sell, it is known as the issuer.

How do they work?

Monex explains that stock markets have technological infrastructure to carry out purchases electronically.

“If you want to sell an action, your stockbroker implements a sales order (electronically).The transaction is completed when the position of one participant coincides with that of another ”, that is, when investor and issuer coincide in the price to be paid, the financial group mentions.

Except for very few exceptions, adds Monex, purchases and sales of the stock market are electronic, this in order to monitor operations and identify investors and issues to provide greater security.

Why does the price of an action upload or lower?

Securities markets work, in part, based on the law of supply and demand.If many people are looking to buy a single company shares, these are going to rise in price because there is a lot of demand for them.However, if few people are buying the shares of another institution, they lower their price and, when this occurs, the issues can choose to sell them so as not to lose their initial investment.

When purchases are made, it is said that the action rose or is green;When the emitters make sales, there is talk that the action went down or lost, or that it is in red.In other words, when everyone wants an action and buy it, gain value;But, when the shares of a company are selling a lot, they lose their value.

It should be noted that there are external factors that determine the decision to buy and sell the issues and investors.

An example is what is now happening on Wall Street.The FED reserve (FED) of the US.UU.He has not hidden his intentions to raise the interest rate this year, which has worried investors;Also, international conjunctures such as tension between Russia, EE.UU.and Ukraine also affects markets.

Because investors hope that the FED softens their speech on a possible rise in the interest rate, this Wednesday the three most important markets in the US.UU.They went up simultaneously, something that did not happen since January 11.However, everything could take a turn when the Fed Report on its most recent monetary policy.

With information from Anneken Tappe, from CNN

Mercados de valoresWall Street

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