The stock market is an umbrella term for global markets where investors can buy and sell different assets, most commonly stocks, which are shares of publicly held and traded companies.

The stock market offers relatively safe investment options compared to other types of investments, but it is not without risk. The better you understand what the stock market is and how it works, the better prepared you will be to avoid stock trading scams.

What are stocks?
When a company goes public, they offer a certain amount of ownership in the company to anyone who wants to invest in the company, in order to raise money to provide further funding for the company. Companies also typically promise stock to early investors in exchange for seed capital. These shares of a company are called stocks, but they can also be called stocks.

Stocks are assets that increase or decrease in value based on a company's financial performance and other factors. The goal of stock market traders is to make profits by investing based on predictions of an increase in market value.

market value
The market value of a stock is the current value at which the stock trades. In other words, it is how much it costs to buy a specific stock at a specific time, or how much money you make after selling the stock.

trading volume
A stock's trading volume is a measure of the number of shares or contracts traded in a specific stock over a specific period of time. The most common time period for measuring trading volume is the trading day, or the time frame when the stock market opens for the day.

Stock type
There are many different types of stocks, but the most frequently traded are common stocks and preferred stocks.

common
Common stocks are the most basic type of stocks issued by listed companies and account for the vast majority of stocks on the market. From a business perspective, shares are equivalent to voting rights on company board issues and other matters.

For example, if a company has 100 shares on the market and you own 5 shares, you own 5% of the company and have 5 votes on the board of directors.

First choice
Preferred stocks are similar to common stocks but provide shareholders with the added benefit that they pay guaranteed dividends. For example, you might receive an annual dividend of 1.5% of the total price of all preferred shares you own in a company. Preferred shareholders also give up voting rights in the company in which they hold shares.

How the stock market works: A basic understanding of what is the stock market?
The stock market is where listed companies issue shares for investors to buy and sell among themselves. In other words, when stocks are bought and sold on the stock market, investors are actually buying or selling shares from other investors rather than dealing directly with the company.

What is stock market volatility?
Stock market volatility refers to the rate at which stock prices rise or fall over a certain period of time. While the nature of the stock market means there is always some degree of volatility, greater volatility means more risk.

How do stock market prices work?
Generally speaking, stock market prices are driven by supply and demand - the more demand there is for a stock, the higher its price, and vice versa. Supply and demand can be affected by many different factors.

For example, if a company announces a successful financial quarter and huge profits, there may be a large number of investors looking to buy the stock because they see great potential in the company's future. This in turn drives up the price of the stock.

How do companies make money from stocks?
When a private company decides to go public, they conduct an initial public offering (IPO), or initial public offering (IPO). When this happens, the company offers a predetermined number of shares of the company's shares, often backed by a bank, which arranges for the shares to be sold on a stock exchange.

In return for selling shares to public investors, companies receive capital that they can then reinvest into the business. Companies regularly issue additional shares on public stock exchanges to raise additional capital as needed.

What is a stock exchange?
A stock exchange is a separate market for buying and selling stocks. There are many major stock exchanges around the world, the most active and well-known of which include the New York Stock Exchange (NYSE), the London Stock Exchange (LSE), and the Tokyo Stock Exchange (TSE).

OTC
OTC stock exchanges are smaller markets that trade stocks for companies that may not meet the requirements to be listed on a larger market like the New York Stock Exchange. OTC stocks are usually bought and sold through a network of brokers and dealers.

Trading on OTC exchanges is riskier than trading on major stock exchanges because they are unregulated and unregulated.

Why do companies issue shares? raise funds
As we mentioned above, the main reason a company issues stock is to raise capital. While early-stage companies can often raise capital through private investment, many companies eventually reach a point where they need more capital to continue growing. At this point, the business may decide to sell its shares on a public stock exchange to raise more capital.

listed shares
When a company is unable to raise enough capital by issuing more shares and/or obtaining more private investment, they can go public and begin selling shares on a public stock exchange through an initial public offering. This process is called listing shares. When a company goes public and lists its shares, early investors have the option to sell the shares they may have received for their early investment.

How does stock investing work?
In order to actually invest in stocks, you must trade through a stock trading platform or broker. Traditionally, this was done over the phone or in person, but there are now a number of online and mobile platforms that make stock investing easier than ever.

What happens when you buy a stock?
When you buy a stock, you become a shareholder in the company that shares the stock. Depending on the type of stock you purchase, this gives you certain rights within that company, such as the right to vote on company decisions or the right to receive dividends from the company.

Once you own a stock, you also own an asset whose value changes, just like owning a house or any other tangible asset. The difference is that stocks aren't something you can touch or see. A stock trading platform tracks all the stocks you own and shows you their current value to help you make buying and selling decisions.

What happens when you sell shares?
When you sell a stock, you receive a sum of money equal to the market value of the stock at the time you choose to sell. Ideally, you want to make a profit by selling your shares, although in some cases you may decide to sell shares that have plummeted in value to avoid further losses. If you sell all of your shares in a company, you are no longer a shareholder in the business and therefore do not have any shareholder rights.

Stock Trading vs. Options Trading: What’s the Difference?
Stocks represent individual shares of a company, while options are contracts with other investors where you can bet on the direction of a stock's price, whether the current price will rise or fall, and the time frame in which all of this will occur.

Options trading is much more complex than stock trading and therefore involves more risks, especially for beginners.

Risks of investing in stocks: getting scammed on the stock exchange
Although stock exchanges and stock market trading are regulated and theoretically safe (as long as you can afford the risk of your stocks losing value), there are various stock market scams to be aware of.

For example, some companies or individuals spread false information, artificially raise stock prices, and then sell off all stocks to obtain profits. This causes the price to drop again, and new investors often lose money.

There are also fraudulent investment advisors and brokers who will charge you for bad investment advice, so you lose money because of them and bad investment decisions.

These are just a few examples of the many ways scammers take advantage of stock market investors. To avoid stock market scams, there are two general golden rules to follow:

Always independently verify any information by checking with reliable sources. This applies to information about a company or advice from an investment adviser or broker. Don't believe anything that sounds too good to be true, because it probably is. The stock market is not a "get rich quick" place, and anyone who claims to be able to tell you how to do it is probably lying. If you were scammed on the stock exchange, get your money back with PayBack
PayBack are experts in recovering money from stock exchange scams. If you find yourself falling into a trap and being completely scammed, all is not lost. Contact us today to find out how we can help you get your money back from a stock exchange scam.