COTSEAL

Stock market is basically a place, for buying and selling of company shares. It works the same way an auction works. There are people who have invested money and want to sell their stocks. At the same time there are others who want to buy penny stocks. The meeting place for the two parties is the trading floor. The stock broking firms are there, to facilitate the transactions. They do the transactions through their agents on the trading floor.

Investors in the stock market could be divided into two main categories on the way they use their investments. There is the first lot, who purchase stocks and keep them as long term investments. They are content with getting their share of profits from the companies they have invested in. Institutional buyers fall into this category. There are others who purchase stocks and wait until the price appreciates, and sell them with a profit. Most small time investors fall into this category. They study trends in the stock market and research the balance sheets of companies, whose shares they are interested in, and do the purchasing when the price in the share in the market is low.

Few decades back it was the rich people who participated in the stock market transactions but since of late this trend changed and institutional buyers entered the market in a big way. At present, institutional investors comprise a sizable portion of the stock market. These institutional members include government bodies, large conglomerates of companies and banks etc. In some occasions they purchase such large volumes of penny stocks, and become controlling share holders of the companies, there by increasing their area of authority. These institutional investors are so powerful that they are able to bargain with stock broking firms and pay reduced commissions. The stock broking companies are happy to do this as the trade volumes involved are huge.