A stock is a security that represents partial ownership of a publicly traded company. Stocks are sold and traded on a public stock exchange like the New York Stock Exchange (NYSE) or Nasdaq. Stocks are often considered a way to diversify a portfolio, since they are an investment that can grow over time, outpacing inflation. They also allow shareholders to vote at shareholder meetings and receive dividends if and when they are distributed. Companies issue shares to raise funds for business purposes. Shareholders buy and sell stocks through a broker.

While stocks can provide a significant return on your investment, they carry greater risk than other types of investments. Choosing the right stocks requires careful research and consideration of your goals, risk tolerance, and risk capacity. A company’s fundamentals are a good starting point for your analysis, including its financial statements and management team. Other factors include supply chains, market trends, and the overall health of the economy and interest rate outlook.

The most common type of stock is common stock, which gives you one voting share for each share purchased. However, some companies may offer other types of stock that differ in terms of the number of votes or rights you have. For example, Class A stock might give you 10 votes per share while Class B stock gives you only five.

A stock’s price changes based on supply and demand, which is affected by how many people want to buy or sell it at any given moment in time. Those who are selling will force the price down, while those buying will drive it up. This can be influenced by macroeconomic forces, such as a global economic crisis or interest rate outlook.

Another important factor in determining whether to buy or sell a stock is the company’s earnings, as measured by its quarterly earnings per share (EPS). This figure is derived by dividing a company’s net income for the quarter by its total number of outstanding shares at the end of the quarter. The higher the EPS, the more likely the stock will rise in value.

In some cases, a stock can decline in value even with positive fundamentals and healthy earnings, such as when a company is facing significant competition or a major negative media event. The reason could be that investors are re-evaluating their risk exposure and moving money from stocks into other assets, such as cash and bonds.

When you are selecting which stocks to invest in, it is helpful to look for those that have recently formed solid chart patterns. This includes double bottoms, which are characterized by one down leg followed by a rebound into resistance and then a second up leg that pushes the stock into a new uptrend. Look for these signs by looking at a stock’s daily volume, its average trading price, and its day’s range. You should also pay attention to a weekly close that is within about 1% of its previous week’s closing price, as this indicates that institutional investors are holding onto the shares instead of selling them.