How the stock market works: The definitive Canadian guide

Key details

• What is the stock market? It's a network of exchanges, like the Toronto Stock Exchange (TSX), where shares of ownership in publicly traded companies are bought and sold.
• What is a stock? A stock (also called a share or equity) represents a small piece of ownership in a single company. When you own a stock, you own a piece of that business.
• How are prices set? The price of a stock is determined by supply and demand. If more people want to buy a stock than sell it, the price goes up. If more want to sell than buy, it goes down.
• How do I start? To buy stocks, you need to open an investment account with a brokerage platform like Questrade.

When the concept is big, think small

Big, intimidating concepts are always just the sum of smaller, simpler ideas. And small ideas are manageable. They are things you can learn, understand, and use with confidence.

This guide is built on that principle. By the end, you'll see that the stock market isn't a single, scary thing. It's just a collection of small ideas, pieced together. So, starting small…

What is the stock market, really?

While it’s the backdrop of some great cinema, the stock market isn’t a set, physical place. The stock market is a giant network where you can buy and sell a very specific thing: tiny pieces of ownership in public companies.

That's it.

When you hear that a company like Lululemon or Tim Hortons is "public," it means they've decided to sell small pieces of their company to people like you and me. Each tiny piece is called a stock or a share.

So, when you buy a stock, you aren't just buying a ticker symbol on a screen. You are buying a small, tangible piece of that actual business. You become a part-owner in their stores, their products, their future successes, and their failures.

This is the most fundamental concept for stock market beginners: you're not gambling on numbers or lines on a screen, you're investing in businesses.

How the stock market works as a whole

You may have noticed this, but the internet changed a few things in our world. The stock market was one of them.

In the past, you had to call a professional stock broker on the phone, who would then relay your order to someone on the frenetic trading floor. It was slow, expensive, and largely inaccessible to average people like us.

But then, the internet. It transformed the stock market into a vast, interconnected digital network. The shouting is now reserved for what’s typed in online communities about stocks because, in practice, data moves so fast.

It erased the need for a middleman—and from that, Questrade was born. Digital-first brokers like us are your gateway, giving you direct access to the entire network of exchanges from your phone and computer. The power to use the market is now all yours—you just have to decide you will.

How do stocks work?

When you buy a stock, you are purchasing a share of ownership in a publicly-traded company. If a company has issued one million shares, and you own one share, you own one-millionth of that company.

This ownership gives you two key things:

1. Access to earnings: As a part-owner, you have a claim to a portion of the company's profits. Companies can share these profits directly with shareholders through payments called dividends, though not all companies pay dividends (they reinvest in the business instead).
2. The Potential for Growth: If the business does well—if its profits grow and its future looks bright—more people will want to become owners. This increased demand can cause the value of your share to go up. You can then hold onto that share and let it rise, or sell that share for more than you paid for it, which is called a capital gain.

Of course, the opposite is also true. If the company performs poorly, the value of your share can go down.

How is the price of a stock determined?

The price of any single stock at any given moment is determined by a simple, timeless principle you’ve almost definitely heard of before: supply and demand.

• Supply is the number of shares that current owners are willing to sell.
• Demand is the number of shares that potential buyers want to buy.

Remember when it seemed everyone, everywhere, was trying to get their hands on Taylor Swift tickets for the Eras Tour. When it started, tickets were a few hundred dollars. But as it grew into an undeniable cultural event, tickets shot up, ranging from a few thousand dollars all the way to being the price of a down payment.

That was the same supply and demand that shapes a stock’s price playing out in real life.

The stock price you see on your screen is simply the most recent price at which a buyer and a seller agreed to make a trade. It reflects the collective, real-time vote of millions of investors on what they believe that piece of the business is worth right now.

Advantages of investing in the stock market

In a sentence, investing in the stock market is one of the most effective ways for individuals to build long-term wealth. In more than a sentence:

• It helps your money outpace inflation. Money sitting in a standard savings account often loses purchasing power over time due to inflation. The stock market has historically provided returns that are significantly higher than the rate of inflation, helping you grow real wealth.
• You get to share in the success of great companies. Investing allows you to benefit from the growth and innovation of the world's leading businesses. As they succeed, you, as a part-owner, can succeed with them.
• It’s more accessible than ever before. We built Questrade with the belief that you—you, reading this—should be able to invest even if you don’t have a lot of money to get started. With no account minimums and the availability of fractional shares (letting you buy a small piece of a stock for as little as $1), the barriers to entry are lower than they've ever been.

How the TSX works: your home field advantage

All this buying and selling needs to happen somewhere. These "somewheres" are called stock exchanges. While there are exchanges all over the world, the main stage in Canada is the Toronto Stock Exchange, better known as the TSX.

Think of the TSX as the premier league for Canadian companies. It's where the biggest and most established businesses in the country list their shares for public trading. Understanding Canadian stock market basics starts with understanding the TSX.

How to actually buy a stock in Canada (in 3 steps)

If you’re more of a visual person, check out this 2025 walkthrough. For the readers, this is how you can make your first purchase.

Step 1: Open an investment account

You can't just walk up to the Toronto Stock Exchange and buy a stock. You need a special account that gives you access to that network. This is where a low-fee brokerage like Questrade comes in.

Opening an account is your ticket to the market.

For most beginners, a Tax-Free Savings Account (TFSA) or a Registered Retirement Savings Plan (RRSP) are often considered the best places to start, as they offer significant tax advantages.

Step 2: Fund your account

Once your account is open, you need to add money to it. This is as simple as transferring money from your regular bank account to your new investment account. Once it lands in your account, you’ll have the capital you need to purchase your first piece of a business.

Step 3: Place your first trade

This is the moment of action. You'll log into your platform, search for the stock you want to buy, decide how many shares you want to purchase, review the order, and click "buy." That's it. You've placed a trade and are now officially a part-owner in a company.

Big ideas, small steps, lasting change

Broken down, the stock market is just a collection of small, understandable ideas: a stock is a piece of a business, an exchange is where you buy it, and a brokerage account is your ticket to get in.

You don't need to be an expert to get started.

You just need to be willing to take the first small step.

You're more ready than you’ve ever been before.