How to trade shares?
Trading shares is the buying and selling of equities on stock exchanges, which are markets built specifically for this purpose. Almost every country on the planet has a stock exchange for public companies, and some have multiple. In this article, we’ll look at some of the notable stock exchanges and how companies list on them.
Stock exchanges have rules on who can use them to buy and sell shares directly. For most individual investors, that means using a broker. Stock brokers are companies that invest in stocks on their clients’ behalf. There are three main types of stock broker: execution-only, advisory, and discretionary. The latter executes trades without any input from you, while advisory brokers may recommend specific trades.
When a private company decides to list and go public, it will join a stock exchange in a process known as an Initial Public Offering (IPO). This is when a company’s stock is first issued. Markets often get excited by IPOs, as this is the first time retail investors can take their view on a company. Public companies are subject to more regulations than private ones, so preparing for an IPO can take some time. Once a business is ready to list, they’ll typically offer their stock at a set price, and investors can apply to buy shares. Then once the listing is complete, shares in the company can be bought and sold as normal.
Ticker symbols are a shorthand way of writing the names of stocks when listing prices, usually consisting of the exchange a company is listed on followed by a few letters to designate its trading name. The ticker symbol for Apple, for instance, is NASDAQ:AAPL. A company’s market cap (short for market capitalization) is the total value of all the outstanding shares it has on the market. To calculate a stock’s market cap, you take the total shares it has available for trading and multiply it by its current share price. This gives you the stock market’s value of the company as a whole.
Share prices are constantly moving as demand fluctuates for different economies, industries, and companies. A few factors that are likely to cause stock market volatility are earnings, news about a company, external factors, and corporate actions. Positive or negative headlines surrounding a company will often play out on its share price. News regarding a company’s economy, industry, peers, and trading conditions can all affect demand and therefore its share price. In fact, stocks in a given industry often perform similarly, as they react to the same headlines. Corporate actions that affect the price of a company’s shares include mergers, directors’ dealings, rights issues, share buy-backs, special dividends, and share splits.
How can you trade shares? If you want to trade shares, you will typically need to use a broker. You can either opt for a full-service broker, who can offer investment advice and manage your portfolio, or use a self-directed platform to make your trades.
Self-directed platforms allow you to trade shares online through a user-friendly interface, and typically charge a lower commission than full-service brokers. Some popular online platforms include eToro, Robinhood, and TD Ameritrade.
When you trade shares, you can either go long or short. Going long means you are buying shares in the hope that they will increase in value, whereas going short means you are selling shares in the hope that their value will decrease.
It is important to remember that share trading is a risky business, and there is always the potential for you to lose money. Before making any trades, you should do your research and make sure you understand the risks involved.
In conclusion, share trading is a complex and dynamic process that can be both rewarding and risky. Stock exchanges around the world facilitate billions of dollars’ worth of trades each day, and there are a wide range of brokers and online platforms that you can use to get involved. Whether you are looking to invest in well-established companies or take a chance on a newly listed IPO, share trading can offer a wealth of opportunities for investors of all levels.