The concept behind how the stock market works is pretty simple. Operating much like an auction house, the stock market enables buyers and sellers to negotiate prices and make trades. The stock market works through a network of exchanges. Companies list shares of their stock on an exchange through process called an initial public offering or IPO. Investors purchase those shares, which allows the company to raise money to grow its business. Investors can then buy and sell these stocks among themselves and the exchange tracks the supply and demand of each listed stock. The supply and demand help determine the price for each security, or the levels at which stock market participants- investors and traders are willing to buy or sell. Buyers offer a bid or the highest amount they are willing to pay, which is usually lower than amount sellers ask for the exchange. The difference is called the bid -ask spread. For a trade to occur, a buyer needs to increase his price or seller needs to decrease hers.