Short answer: Stock market trading means buying and selling ownership stakes in publicly listed companies, called shares. Orders are placed through a stockbroker, matched electronically by the stock exchange’s trading system, and the resulting shares are held in a demat account, a digital account for securities.
Last reviewed: 12 November 2026
At a glance
| Term | What it means |
|---|---|
| Primary market | A company sells new shares to the public for the first time, through an IPO (initial public offering) |
| Secondary market | Investors trade shares that have already been issued among themselves |
| Demat account | A digital account that holds shares and other securities electronically |
| Bid | The highest price a buyer will pay |
| Ask | The lowest price a seller will accept |
| Fundamental analysis | Assesses a company’s intrinsic value using its financials |
| Technical analysis | Uses past price and volume charts to anticipate future price moves |
What does owning a share actually mean?
A share is a unit of ownership in a company. Buying one makes you a partial owner of that company, however small the stake.
Your investment then rises or falls with two things: the company’s performance and the share’s market price. The two often move together, but not always, because the price reflects what buyers and sellers are willing to pay at a given moment.
Where do shares come from?
Shares reach the market in two stages. In the primary market, a company sells new shares to the public for the first time through an IPO. Once those shares have been issued, they move to the secondary market, where investors trade them among themselves.
Most day-to-day buying and selling you will see on screen happens in the secondary market. The company does not receive money from those trades; the money moves between investors.
What happens when I place an order?
You do not deal directly with the company or with other investors. You give your order to a stockbroker, who routes it to the stock exchange. The exchange’s trading system matches your order with a suitable opposite order electronically.
After matching, the trade goes through clearing and settlement, the steps that finish the transaction. Your shares are credited to your demat account, which is why you need one to hold shares in electronic form.
Why do share prices move?
Prices are set by supply and demand. They tend to rise when buyers outnumber sellers and fall when sellers outnumber buyers. No single authority fixes the price each day.
Several things shift that balance. Company performance, sector trends, and economic or political news all influence how many people want to buy or sell a share, and so its price. A single piece of news can change the balance quickly.
What are the bid and the ask?
At any moment, a share has a bid and an ask. The bid is the highest price a buyer will pay, and the ask is the lowest price a seller will accept.
The gap between the two is a small but real cost. If you want to buy immediately, you typically meet the ask. If you want to sell immediately, you typically meet the bid.
How do people try to make sense of prices?
Investors use two broad approaches. Fundamental analysis assesses a company’s intrinsic value using its financials, such as its earnings and debt. Technical analysis uses past price and volume charts to anticipate future price moves.
Neither method guarantees a correct outcome. Two investors can study the same company and reach different conclusions, which is part of why prices keep moving.
What are the catches?
The main catch is that a loss is possible. Consider this hypothetical example, with all figures invented for illustration:
Suppose a share trades at Rs 400, and you buy 25 shares for Rs 10,000. If the price later falls to Rs 360, your holding is worth Rs 9,000, a loss of Rs 1,000. If it rises to Rs 440, the holding is worth Rs 11,000, a gain of Rs 1,000. This example ignores brokerage and other charges, which reduce both outcomes.
The same price movement works in both directions, and a fall can take the value below what you paid. Prices can also move sharply on news that you may not see in time to react.
Frequently asked questions
Do I need a stockbroker to trade shares?
Orders are placed through a stockbroker, who routes them to the stock exchange. The broker is the channel through which your order reaches the market.
Can a share’s price fall after I buy it?
Yes. Your investment gains or loses value with the company’s performance and the share price, so the value can drop below what you paid.
What is the difference between an IPO and ordinary trading?
An IPO is the first time a company sells new shares to the public, which is the primary market. Ordinary trading among investors after that takes place in the secondary market.
Does good company performance always push a share price up?
Company performance is one of several influences, alongside sector trends and economic or political news. Prices follow the balance of buyers and sellers, so good performance does not guarantee a rise.
Sources and last check
Facts in this article were checked against the sources below on 12 November 2026. Rules and figures can change; check the primary source before acting.
- upstox.com (broker education)
- kotakneo.com (broker education)
- zerodha.com (broker education)
This article is general information, not investment advice. MyFinanceBandhu is not a SEBI-registered investment adviser.