The Digital Marketplace: How Stock Exchanges Work

Digital Supermarket

In the old days, a stock exchange was a loud room full of people shouting and waving papers. Today, it’s a giant, super-fast computer network.

Think of the Stock Exchange (like the NSE or BSE) as a highly regulated digital supermarket.

• The Companies are the products on the shelves.

• The Stock Exchange is the building that ensures the lights stay on, the prices are fair, and the transaction is safe.

• The Investors are the shoppers.

The Big Names: NSE and BSE

In India, we have two main "supermarkets":

• BSE (Bombay Stock Exchange): The oldest exchange in Asia. It’s like the classic, heritage department store.

• NSE (National Stock Exchange): The younger, tech-heavy exchange where the majority of daily trading happens today.

The Mentor’s Secret: It doesn't really matter which one you use. Most big companies are listed on both. If you buy a share of a big tech company on the NSE, it’s the same "slice" as buying it on the BSE.

How the Price is Decided (The "Auction")

Have you ever used an app to call a cab during a rainstorm? The price goes up because many people want a car, but few are available. Stock exchanges work the same way through an ongoing auction.

• If more people want to buy a stock than sell it, the price goes up.

• If more people want to sell a stock than buy it, the price goes down.

The exchange’s only job is to match a buyer with a seller at a price they both agree on.