🔍

Trading 101: How Does the Stock Market Work? - YouTube

Channel: ClayTrader

[0]

I've done a video about what the stock

[1]

market is but now I want to talk about

[3]

how the stock market actually works now

[12]

I'm pretty excited about this video just

[14]

because it was totally not my idea it

[16]

was inspired by a comment that I got on

[18]

the previous video that I've already

[20]

referenced what is the stock market and

[22]

I'll fully admit I assumed sorry about

[26]

that and I just figured that everybody

[28]

would understand what this person is

[29]

asking but now if I you know pull myself

[31]

out of my shoes and put myself in it you

[33]

know a brand new trader shoes then oh

[36]

yeah that that makes perfect sense so

[38]

like I said sorry for the assuming but

[41]

now we're going to go through this

[42]

comment bit by bit and that's going to

[44]

you know prompt pretty much all the

[45]

talking points in this video i should

[47]

note if you did not watch what is the

[49]

stock market video and you have no idea

[51]

what the stock market even is go back

[53]

and watch that video first because were

[54]

going to kind of piggyback off of that

[55]

for those of you that have watched that

[57]

video now we're going to be talking more

[58]

about pizza

[59]

so that should still make sense to you

[61]

so let's get to this comment and then

[63]

we'll jump right into the different

[64]

questions and topics so this person says

[67]

who are you trading your stocks with and

[69]

why are you trading them what's the

[71]

purpose are you trading with other

[73]

shareholders and why like why would you

[76]

sell your stock and if you sell what you

[78]

get in return another stock I wish one

[81]

video would explain this

[83]

I am super I am a super beginner and

[86]

everyone skips this part anyone mind

[88]

explaining this please I would really

[90]

appreciate it so let's go back to this

[92]

first part and that'll provide us with

[94]

our initial talking point who are you

[96]

trading your stocks with and why are you

[98]

trading them what's the purpose so who

[100]

are you trading stocks with well the

[103]

stock market a market is just made up of

[106]

a bunch of people so that's who you're

[107]

trading stocks with now sure you can

[109]

have different entities you know hedge

[110]

funds

[111]

you know algorithms all sorts of

[113]

different stuff like that but don't

[114]

confuse yourself with that just

[115]

understand you're trading with at the

[117]

end of the day other people that make up

[118]

the market so in this example let's just

[121]

say we have Billy Bob right here so

[126]

we'll just call him bebe Billy Bob and

[128]

he owns a stock

[131]

he owns a share of something

[133]

our case going back to the previous

[137]

video you know this is a piece of pizza

[138]

he owns some pepperoni pizza or a slice

[142]

of it so that's just what a share is he

[144]

owns a slice of pepperoni pizza and he

[146]

bought that for five dollars so Billy

[152]

Bob is a participant in the market he is

[155]

somebody that is making up the market

[157]

itself so what is the purpose of all

[160]

this at the end of the day the purpose

[162]

is Billy Bob wants to make money whether

[166]

it's money in the very short term like a

[168]

trader would want to do whether it's

[169]

money later on in life for retirement

[172]

the whole point is you want to grow

[174]

money in the market so at its core make

[178]

money that's the whole purpose of

[179]

trading that's the whole purpose of the

[180]

stock market any way you slice it pun

[182]

intended so but Billy's just one person

[186]

right

[187]

what then goes on is if Billy wants to

[190]

sell so this is kind of like a little

[195]

buffer zone here that is within the

[197]

market and this is what we would call a

[201]

broker and in this day and age you know

[205]

you can still put you know get the phone

[207]

and talk to your broker but online is

[211]

where the vast majority of this broker

[214]

stuff is happening so the broker is

[217]

what's connecting Billy Bob to other

[220]

people in the market so this next part

[223]

are you trading with other shareholders

[225]

and why like why would you sell your

[227]

stock and if you sell it what do you get

[229]

in return another stock so are you

[232]

trading with other shareholders maybe

[234]

maybe not

[235]

some people could also already own

[238]

pepperoni pizza maybe they want some

[240]

more slices of it some more shares of it

[242]

maybe somebody does not own any

[244]

pepperoni pizza at all so in that case

[246]

they're not a shareholder but they want

[247]

to become a shareholder so are you only

[249]

trading with other shareholders

[250]

absolutely not take you for example

[252]

maybe you've never traded the stock ever

[254]

but you could enter into the market and

[256]

you would then be able to buy and

[258]

participate so know you're not always

[260]

trading with other shareholders

[261]

sometimes it might just be somebody

[262]

brand new but again why would you want

[266]

to I do you want

[267]

all this to make money that's really the

[269]

end that's it to make money that's the

[271]

whole purpose of all of this now what do

[274]

you get in return well let's go through

[276]

that so and this is really going to

[277]

summarize what's going on within the

[279]

market so Billy Bob you know he bought

[282]

that piece of pizza pepperoni for five

[285]

dollars some good things go on

[287]

you know pepperoni super good for your

[289]

health new you know research comes out

[292]

so that all of a sudden causes his five

[294]

dollar piece of pepperoni pizza to now

[296]

be worth eight dollars and fifty cents

[299]

so that that's good because he bought it

[302]

for five now all of a sudden it's worth

[303]

eight dollars and fifty cents and why

[306]

would he sell so I don't know there's so

[309]

many reasons maybe he's got a bill that

[311]

he needs to pay maybe he just thinks

[314]

that 850 it's kind of overvalued that's

[316]

crazy I can't believe somebody's willing

[318]

to pay that much I don't think it's

[319]

going to go up any higher price so he

[321]

just wants to get out maybe um you know

[324]

like I said he's in retirement and he

[326]

needs that money to you know there's

[328]

just so many reasons why do people sell

[330]

again at the end of the day people sell

[332]

because I want to put the money in their

[334]

pocket as long as he owns pepperoni

[336]

pizza a share of it it's just a piece of

[337]

pepperoni pizza it doesn't have any

[339]

value until you sell so in order to

[342]

what's called realized the gain you need

[344]

to actually sell so that is why at its

[347]

core because he wants money he wants to

[348]

put money in his pocket because before

[350]

you sell

[351]

yes something might be worth 850 but

[353]

it's only worth you lock in the worth

[356]

when you sell so how is he going to do

[358]

this does he you know go to his neighbor

[360]

and knock on the door and say hey I got

[361]

a share a pepperoni pizza do you want to

[364]

buy this from me for $8.50 good news is

[367]

no that's not how the market works at

[368]

all the way everything does work though

[370]

is we have other people in the market so

[373]

over here give her some here we have

[377]

Sally sue and Sally sue is just

[381]

brand-new she's you know hey I'm getting

[384]

to the market and I you know I read all

[387]

these studies on pepperoni pizza it's

[388]

supposed to be really good I think I

[390]

think pepperoni pizzas only going to get

[392]

more valuable so I would like to buy

[394]

some pepperoni pizza well what does she

[396]

need to do in order to buy well she

[398]

needs to find some she needs to find his

[400]

seller

[401]

so what she's gonna do is she's gonna go

[405]

to her broker what Billy Bob's doing

[407]

because remember he wants to sell so

[409]

what does he need to do in order in

[410]

order to sell well you need he needs a

[413]

buyer right if you try to sell your car

[415]

yeah you can sell it but until a buyer

[418]

comes along it's just going to be

[419]

sitting out in your front yard so he is

[421]

also going to go to his buyer or excuse

[423]

me go to his broker looking for a buyer

[424]

so he is looking for a buyer she is

[428]

looking for a seller and the broker

[436]

right here online is where this is all

[438]

taking place and this is all taking

[440]

place in fractions of a second if you go

[442]

to your online broker and you're

[444]

clicking buy sell all that sort of stuff

[445]

I mean this stuff is happening like this

[447]

this is a very just simplistic way but

[451]

that's how its operating your broker is

[452]

is computer programs and it's matching

[455]

up people that want to buy with people

[457]

that want to sell it's helping Billy Bob

[459]

find a buyer it's helping Sally sue find

[462]

a seller it's bringing them together and

[464]

then it's going to allow the exchange to

[466]

happen so Sally sue thinks that their

[469]

broker all this stuff is happening

[470]

online she gets the shares and she pays

[476]

$8.50 so we'll go through some quick

[479]

math real quick

[484]

he bought Billy Bob for $5.00 and he

[490]

sold for $8.50 so what is the difference

[495]

between these numbers some quick math

[497]

the difference is three dollars and

[499]

fifty cents so to answer the final

[501]

question what is but Billy Bob get for

[503]

selling does he get more shares no he is

[506]

getting cash he's getting money into his

[509]

count which equates to three dollars and

[512]

fifty cents on the game because he

[514]

originally had to spend five dollars all

[516]

of a sudden he now has $8.50 in his

[519]

account so when you do the math well

[521]

he's got three dollar fifty cents more

[522]

than where he started therefore this is

[524]

his actual gain but to answer the heart

[526]

of the question when you sell your

[528]

broker is putting money into the pocket

[531]

so Sally sue does not have to you know

[534]

jump over all this

[535]

you know walk over to Billy Bob's house

[536]

and you know hey you know grab her purse

[538]

and hand him $8.50 the seller is giving

[542]

the money to the broker and then the

[543]

broker is giving the money to Billy Bob

[545]

and this again is all happening in you

[549]

know seconds it's it's very quick and it

[551]

happens just like that so by no means is

[554]

this some you know if you're trying to

[555]

sell a house obviously that's a big long

[557]

process you have to put in an offer and

[560]

go through paperwork and then wait for

[561]

things and then transaction you know

[563]

just oh just if you've ever bought a

[565]

house you know exactly what I'm talking

[566]

about

[567]

not so here this is everything happens

[571]

due to the broker and you know the way

[574]

everything is set up so you know kind of

[576]

answer those final questions why are

[579]

people selling why do people trade to

[582]

make money why would they because they

[585]

need money they want to convert their

[586]

shares into money that's how you convert

[588]

a share of stock you know a piece of

[590]

pizza into actual cash and then what are

[593]

you getting in return are you getting

[595]

more shares are you getting you know

[597]

what are you get you're just getting

[598]

cash it's like your checking account all

[600]

of a sudden money shows up into your

[601]

checking account and the ideal idea is

[604]

you want more money than what you

[605]

started with now if something bad

[607]

happened and Billy Bob could only sell

[609]

to Sally Stu for $3 well he spent $5.00

[613]

but now this broker is only putting $3

[615]

back into his account which means he

[617]

lost $2 so it's not oh you're not always

[619]

going to make money but that's the goal

[621]

you want your broker to be putting more

[623]

money into your account than what you

[624]

started with but this is how the stock

[626]

market works your broker is matching up

[630]

buyers and sellers some people want to

[632]

sell some people want to buy why what

[633]

are their motivations I mean it truly is

[636]

endless on why somebody would want to

[638]

sell or why somebody would want to buy

[639]

obviously people are buying because they

[641]

think the value is going to go higher

[642]

people are selling because a they need

[645]

some cash right then and there or B they

[648]

think yeah I don't think the value is

[649]

going to go any higher I want to get out

[651]

right now but you know all little

[653]

details of that I mean that is truly a

[655]

case-by-case basis so hopefully this

[657]

helps you out fantastic questions and

[660]

you know if you or anybody have any

[663]