What is share trading? Well to begin with a share is a division of a firms capital available to be bought and sold freely on stock exchanges. Essentially they are a form of financial security (normally referred to as a stock). An owner of a share (shareholder) also owns part of the firm who issued the share. Shares can appreciate and depreciate in value; share traders utilize this. Buying shares low and selling when high forms the basis for generating revenue. ‘Ordinary’ shares are the most commonly encountered form of share e.g. equal return per dividend/share, single vote per share etc. It must be noted however that specialist forms of share also exist; an understanding of these would be advantageous prior to active participation in share trading.
How is share trading carried out online? Traditionally share trading was reserved for stockbrokers and floor traders who would engage in the activity at actual physical exchanges. Advancements in communications and networking have led to the need for an actual meeting place between share trading counterparties to diminish; the automation of the trading process (through the medium of the internet) means that access is easier than before. Online trading platforms (software packages) allow for this access; they provide users with the means to create transactions, track current market activity and manage their trading profile. Like traditional trade methods a broker is required to generate the transactions on behalf of the user, fortunately online share trading accounts are readily available to cater for this. There is an abundance of online share trading platforms out there, finding the correct one for you is of the utmost importance.
Why do people engage in share trading? There are many reasons why share trading has become such an attractive prospect in recent years, not simply for the aforementioned improvement made in accessibility. Most importantly is that being able to interpret financial markets for potential lucrative opportunities is an invaluable skill; simple tenacity can allow for anyone to succeed. Furthermore, with share trading you are your own boss, you decide what is important and what is worth risking. Share trading is a teaching process; it is an ongoing exercise, the more you do the more you understand and ultimately the more you will get out of it as a collective experience. Of course it must be indicated that it is not necessarily easy, preparation and anticipating risk correctly are your major priorities concerned with being a successful share trading investor.
What are some key features involved with the share trading process? Primarily identifying an opportunity is the starting point; this could typically be the speculation of an imminent rise in share price for example. Once an opportunity is identified, buying (or selling) shares is the next step; so in the current example buying some of these shares would be ideal (of course prior to the actual speculated rise). Monitoring of the current market conditions (maybe through charting or updates on the platform) would then allow for the share trading to be carried out. In ideal conditions (say when the price rose) the buyer could then sell their shares to receive more back than they initially put in (hence generating a profit). This of course is very simplified example of share trading, and there are many factors involved. Remember, speculation is not always necessarily accurate; risks need to be assessed before committing to share trading.
Risk warning: Spreadbetting, CFD trading and Forex are leveraged. This means they can result in losses exceeding your original deposit. Ensure you understand the risks, seek independent financial advice if necessary. The value of shares and the income from them may go down as well as up. Nothing on this website constitutes a solicitation or recommendation to enter into any security or investment.