A stock is a fractional ownership stake in a company or corporation. It entitles the owner to dividends, voting rights, and the potential to see the company grow in value.

Stock prices in the market are based on supply and demand at any given moment. The supply is the number of shares currently in circulation and the demand is the number of investors that want to buy a share at that instant. If there is more demand than supply, the price of a stock will rise; otherwise, it will fall.

Investors often divide stocks into categories by sector and industry groups, for example, technology, energy, and financials. Traders look for strong sectors and industries when they go long, which means buying stocks with the expectation that their price will rise. They also look for weak ones when they go short, which means borrowing and selling a stock that you think will fall, with the hope of buying it back later at a lower price and pocketing the difference.

Most companies begin offering their stock to the public through a process called an initial public offering, or IPO. Once a stock is listed on the exchange, it can be bought or sold from investors. Traders often segment the stock market by size, as well, with large-cap stocks, mid-cap stocks, and small-cap stocks. The very smallest stocks are sometimes called “penny” stocks and may not even earn a profit.

As with all investment vehicles, there are a lot of people out there who will tell you that beating the stock market is impossible. There are also a lot of people who will tell you that if you stick with it for the long term, you can make significant wealth by investing in stocks. The truth is that it all depends on your personal risk tolerance and your ability to understand and analyze a company’s business fundamentals.

A stock’s intrinsic value isn’t directly tied to its market price, despite what some would like you to believe. To really assess a stock’s worth, it is necessary to understand the company, its management team, and its products. A company that has great products, is ahead of the curve in terms of innovation, or has a good brand name can all boost its stock’s value.

There are many tools available for assessing a stock’s value, such as price-to-earnings ratios or price-to-book ratios. However, using only these tools is like being a football coach who just looks at the opponent’s offense — it is important to consider the defense, special teams, and coaching philosophy as well. The stock market is a complex and ever-changing beast, and it takes time to learn how to read the signals it sends. Once you’ve mastered the basics, there are endless possibilities for growth. Good luck!