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What is the Stock Exchange [br]and how does it work?

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The Stock Exchange is nothing more [br]than a giant globally network

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tend to organize the market place where every day [br]huge sums of money are moved back and forth.

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In total over sixty trillion (60,000,000,000,000) [br]Euros a year are traded.

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More than the value of all goods and services [br]of the entire world economy.

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However it's not apples or second hand [br]toothbrushes that are traded on this marketplace.

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But predominantly securities.

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Securities are rights to assets, [br]mostly in the form of shares.

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A share stands for [br]a share in a company.

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But why are shares traded at all?

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Well, first and foremost the value of a share [br]relates to the company behind it.

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If you think the value of [br]a company in terms of a pizza.

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The bigger the overal size of the pizza, [br]the bigger every piece is.

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If for example Facebook is able to greatly [br]increase its profits with a new business model.

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The size of the companies pizza will also increase, [br]and as a result so will the value of its shares.

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This is of course great for the shareholders.

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A share which perhaps used to be worth 38 euros [br]could now be worth a whole 50 euros.

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When it's sold this represents [br]a profit of twelve euro per share!

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But what does Facebook gain from this?

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The company can raise funds by selling [br]the shares and invest or expand its business.

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Facebook, for example, has earned sixteen billion [br]dollars from its listing on the Stock Exchange.

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The trading of shares though, [br]is frequently a game of chance.

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No one can say which company [br]will preform well and which will not.

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If a company has a good reputation, [br]investors will back it.

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A company with a poor reputation or poor [br]performance will have difficulty selling its shares.

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Unlike a normal market in which goods [br]can be touched and taken home

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on the Stock Exchange only [br]virtual goods are available.

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They appear in the form of share prices [br]and tables on monitors.

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Such shareprices can rise [br]or fall within seconds.

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Shareholders therefore have to act quickly [br]in order not to miss an opportunity.

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Even a simple rumor can result in the demand for [br]a share falling fast

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regardless of the real value of the company.

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Of course the opposite is also possible.

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If a particularly large number[br]of people buy weak shares.

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Because if they see for example [br]great potential behind an idea.

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Their value will rise as a result.

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In particular young companies [br]can benefit from this.

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Even though their sales might be falling, [br]they can generate cash by placing their shares.

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In the best case scenario this will result in [br]their idea being turned into reality.

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In the worst case scenario, this will result in a [br]speculative bubble with nothing more than hot air.

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And as the case with bubbles, [br]at some point, they will burst.

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The value of Germany's biggest thirty companies [br]is summarized in what is known as the DAX share index.

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The DAX shows how well or poorly [br]these major companies

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and there by the economy as a whole [br]are performing at the present time.

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Stock Exchange is in other countries [br]also have there own indices.

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And all of these markets together [br]create a globally networked marketplace.