The primary thing before investing in stock markets is to have an understanding of how the stock markets operate. Companies need capital for various purposes like expansion, research and development etc. Many companies choose to raise funds by offering the company's shares to the public. When investors own the shares of a company they become part owners of that company. The company gets listed on a stock exchange(s) after which its shares start getting traded. Stock exchange is a marketplace where sale and purchase of shares take place.

In order to buy or sell shares, investors need to open a trading account with a stock broker. Investors give instructions to their broker to buy or sell shares on treir behalf. Trading can be done through telephone, internet, or in person. The price at which trade takes place is determined by the market forces i.e. demand and supply of that particular share in the market. Investors hope to earn profits by buying shares at a low price and selling them at a higher price. Some people invest into the stock market for a long period time (3-5 years or more) and some people invest with an objective of earning short term profits (less than a year). The following terms are used frequently in stock markets.