TL;DR: A stock exchange is simply a marketplace—physical or digital—where people buy and sell shares. Prices are set by supply and demand, and the exchange makes trading safe, transparent, and efficient.

Stock Exchanges in Plain English

Think of a stock exchange like a busy fruit market. Sellers line up their apples, buyers wander through deciding what they’ll pay, and the deal happens when both sides agree. Prices rise when apples are in high demand, and fall when there are too many sellers.

Now swap apples for company shares—that’s a stock exchange.

Definition: A stock exchange is an organised platform where stocks and other financial instruments are traded between buyers and sellers.

Why Stock Exchanges Exist

Companies need money to grow. Instead of borrowing from banks, they can raise funds by selling slices of ownership—shares—to the public. The stock exchange provides the platform where:

• Investors can safely buy and sell those shares

• Prices are visible and updated in real time

• Companies gain access to capital for expansion

Without exchanges, trading would be chaotic and far less transparent.

How a Stock Exchange Works

At its heart, a stock exchange is about matching buyers with sellers:

• Orders – Investors submit buy or sell instructions.

• Order Book – The exchange records bids (highest price buyers offer) and asks (lowest price sellers accept).

• Matching Trades – When a bid meets an ask, a trade is executed.

• Continuous Updating – Prices shift constantly as new orders flow in.

This process runs minute by minute, creating the live stock prices you see on your screen.

Key Components of a Stock Exchange

1. Listings

   Companies must meet regulatory and financial requirements before being listed.
   
   

2. Ticker Symbols
   Each listed company is identified by a short code (e.g., AAPL for Apple).
   
   

3. Market Participants

   • Retail investors: everyday individuals

   • Institutional investors: funds, banks, pensions

   • Market makers: firms ensuring trades flow smoothly by constantly buying and selling
     
     

4. Trading Types

   • Market orders: buy or sell immediately at the best available price

   • Limit orders: set a maximum (for buying) or minimum (for selling) price; trades happen only if matched

How Prices Are Formed

Prices reflect the push and pull of supply and demand:

• More buyers than sellers → prices rise

• More sellers than buyers → prices fall

Other factors shaping prices include:

• Company earnings and future guidance

• Industry trends and broader economic shifts

• News and announcements

• Overall investor sentiment

• Liquidity (ease of trading a stock)

Types of Stock Exchanges

1. Primary vs. Secondary Markets

   • Primary market: Where new shares are issued, such as during an Initial Public Offering (IPO).

   • Secondary market: Where investors trade existing shares with each other (the majority of stock trading).
     
     

2. Major Global Exchanges

   • New York Stock Exchange (NYSE)

   • Nasdaq

   • London Stock Exchange (LSE)

Despite their size and location differences, they all share the same goal: efficient, transparent trading.

Why Stock Exchanges Matter

• They create a structured, safe environment for trading.

• They provide real-time visibility of prices and transactions.

• They support company growth by making it easier to raise funds.
  
  

Without exchanges, investors would struggle to trade shares fairly or reliably.

Stock Exchange in Practice

Say you want to buy shares of a company:

1. You place a buy order at your chosen price.

2. The exchange finds a seller willing to sell at that price.

3. Trade executed → the stock price updates.

4. Prices keep moving as more buyers and sellers enter the market.

This is the stock market in action, every minute of the day.

Common Beginner Questions

• What is a stock exchange?
  A platform where company shares are bought and sold.
  
  

• How does a stock exchange work?
  By matching buy and sell orders and updating prices in real time.
  
  

• Are stock prices guaranteed?
  No—they rise and fall depending on supply, demand, and market conditions.

Getting Started as a Beginner

You don’t need to master every detail to start learning. Focus on:

• Understanding basic terms: bid, ask, ticker, market order, limit order

• Watching how prices react to company news or economic updates

• Remembering that prices reflect both fundamentals and investor sentiment

The more you observe, the more natural it becomes.

Final Thought

At first glance, a stock exchange may seem intimidating. But at its core, it’s just a marketplace—a meeting point where buyers and sellers agree on prices. Mastering the basics of how exchanges work lays the foundation for smart, confident investing.

Ready to Take the First Step?

With bunq, you can start investing with as little as €10. Learn by doing, watch prices move in real time, and grow your confidence.

👉 Check out bunq Stocks and download the bunq app today.

Disclaimer: bunq does not provide investment advice. Stocks trading involves risk of loss. bunq b.v. trading as bunq is licensed by the Dutch Central Bank (DNB) in the Netherlands and is regulated by the Central Bank of Ireland for conduct of business rules. All Stocks trading is conducted through our partner, Ginmon.