1.1.5.3 Primary market and secondary market

The process of raising funds by government, public institutions or companies through the issuance of bonds or stocks is called the primary market. The primary market provides a direct source of funding for social and business development. For stocks, this is also known as the IPO (Initial public offering).

The secondary market is aimed at the trading process of financial products issued after the completion of fundraising in the primary market, with the aim of providing sufficient liquidity for the entire market. For stocks, such as the stock exchanges and platforms provided by the New York Stock Exchange, the stock exchanges and platforms provided by the Shanghai Stock Exchange.

It should be noted here that the trading behavior of the secondary market does not have a direct impact on the government, public institutions or company operations that have completed the fundraising in the primary market.

Especially for the stock market, many traders are prone to the illusion that when prices fall, it seems that their corresponding entities are also on the verge of falling or even collapsing. We use an example to illustrate.

From the figure, we can more clearly realize that even if the stock price falls to near zero, it will not affect the fact that the funds raised by the company were used for enterprise development (unless the funds raised are illegal).

[Thinking] When the stock market is in a bear market or a bull market, is the trader's understanding of the company too much influenced by the market price?


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