Baziloo Academy Level: Beginner ⏱ 4-minute read

How does the stock market work? A beginner’s guide

By The Baziloo Editorial Team ·Published on 18 July 2026 at 12.01 pm

The stock market is a marketplace where shares in companies are bought and sold. Understanding how it works is the first step towards making informed investment decisions.

🎯 What you’ll learn

Defining what the stock market is and its economic role
Understanding the concept of shares and why companies issue them
Find out how stock market transactions are carried out
Identifying the key players in the stock market

What is the stock market?

The stock exchange is an organised market where financial securities are bought and sold. The best-known of these are shares, which represent ownership stakes in a company. Imagine a bakery divided into 1,000 equal parts: each part is a share. If you buy 100 of them, you own10 % of the bakery.

Stock exchanges have existed for centuries. Their main role is to enable companies to raise money (find investors) and individuals to invest their savings. In France, the main stock exchange is called Euronext Paris. There are others around the world: the NASDAQ and the NYSE in the United States, for example.

Every day, millions of transactions take place there. Share prices rise and fall in line with supply and demand: if lots of people want to buy a share, its price goes up; if lots of people want to sell, it goes down.

How do shares work?

A share is a certificate of ownership. When a company ‘goes public’, it sells shares to raise money for growth, to build a factory, to take on staff, and so on. This initial sale is known as an initial public offering, or IPO.

When you buy a share, you become a shareholder (owner of a small stake) in the company. You are then entitled to two things: to have a say in important decisions (at general meetings) and to receive a share of the profits, known as a dividend, if the company pays one out.

But the main motivation for a retail investor is often different: to make money by selling the share for more than they paid for it. If you buy a share at 100 € and sell it at 120 €, you make a profit of 20 €. This is the capital gain.

How do you buy and sell on the stock market?

You cannot buy shares directly on the stock market in the same way as you would at a supermarket. You need to go through an intermediary: an online broker (an online platform) or a bank. You open an account, deposit some money, and then place a buy or sell order.

When you ask to buy 10 shares in Company X at 50 €, your broker looks for a seller willing to sell at the same price. Once a deal has been agreed, the transaction is completed in a matter of seconds. The share is added to your portfolio (your collection of securities).

Trading takes place continuously during the stock exchange’s opening hours (usually 9.00 am to 5.30 pm in France). After the market closes, you cannot buy or sell until the following day.

The key players on the stock market

Listed companies: these are companies that sell their shares on the stock market. Retail investors like you: those who buy shares for their own account. Institutional investors: investment funds, insurance companies and banks, which manage billions on behalf of their clients.

Brokers: they facilitate transactions. Regulators: in France, this is the Autorité des marchés financiers (AMF), which ensures that everything is conducted in a lawful and fair manner. Without these players, the stock market could not function.

📖 Definitions

Action: A share in a company. Buying a share means becoming a shareholder and owning a small portion of that company.
Shareholder: A person or entity that owns one or more shares in a company. They are therefore a co-owner of that company.
Dividend: The proportion of a company’s profits paid out to its shareholders. Not all companies pay out dividends, nor do they do so every year.
Capital gain: A profit made by selling a security (share, bond) for more than it was bought for. Example: purchase100 €; sale120 € = capital gain of20 €.
Portfolio: All the securities (shares, bonds, etc.) held by an investor. This is their portfolio of investments.

💡 A practical example

You open an account with an online broker. You deposit 1 000 €. You decide to buy 10 shares in TechCorp at 50 € each (total cost: 500 €). Six months later, the price rises to 70 € per share. You sell your 10 shares for 700 €. You make a capital gain of 200 €. You still have 500 € in cash in your account (initial 1 000 € − 500 € spent + 700 € received = 1 200 €).

⚠️ Risks you need to be aware of

Share prices may fall: you may lose some or all of your initial investment.
The stock market is volatile: prices change constantly, sometimes rapidly, which can cause panic.
Risk of making poor, emotional decisions: buying or selling on a whim, without thinking it through.
Brokerage fees: each buy or sell transaction may incur fees, which reduce your profits.
No guaranteed return: unlike a savings account, nothing is guaranteed on the stock market.

✅ Key points to remember

The stock exchange is a market where shares – which represent ownership stakes in companies – are bought and sold.
When you buy a share, you become a shareholder and can make a profit through dividends or by selling it on at a higher price.
Trades are carried out via an online broker or a bank, during the stock exchange’s opening hours.
Investing in the stock market involves risks: prices may fall, and there is no guarantee of a return.
Before investing, you need to understand the basics and be prepared for the possibility of losing money.

🧠 Test your knowledge

1. What is a share?

2. How do you make money on the stock market?

Fancy taking it a step further?

Analysise this security in detail on Baziloo — B-Score, risk metrics, price history — and track it in your portfolio.

📊 Explore the values on Baziloo → Ideas to explore All articles

Sources

AMF — Investor Zone (Autorité des marchés financiers) — amf-france.org