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How to Trade Shares?

Read more about what shares trading is, how to trade shares and discover a range of tips and strategies.

The trading of shares revolves around the value of a companies’ stock, which is in turn also influenced by how well a company is perceived to be doing. But rather than purchasing a stock outright, traders can spread bet or trade a contract for difference (CFD) to speculate on the price of the security.

Simply put, if a trader believes that a company’s stock will go up in value, they will ‘buy’ that stock. If it does indeed subsequently rise, they will make a profit. However, in the event that the stock ends up dropping in value, if they decide to close out the trade at this point in time, they will incur a loss.

The opposite also holds true; if a trader suspects that a firm’s share price is about to fall, they will often be able to ‘sell’ the stock in the hope that that it will decrease in value and they can then ‘buy’ it back for less. However, should the stock do the opposite, and rise in value, if they then decide to cut their losses and close the trade they will then lose money, since they would be buying the stock at a higher price than that at which they sold it.

Trading Times

Trading SharesTrading Times

Newcomers to shares trading should be aware that in the case of stocks that are not listed on multiple indices, they will only be able to ‘buy’ or ‘sell’ that equity when the index that lists the stock is open. For example, someone who wanted to trade Marks & Spencer stock would only be able to do so during the trading hours of the UK FTSE100 (08:30 – 16:30). However, traders still have the ability to place ‘buy’ or ‘sell’ orders outside of this time period, and such orders could be initiated in due course when the markets open.

Trading_Times

Business Scenario

Trading SharesBusiness Scenario

Serious equity traders will usually keep a very close eye on the businesses linked to the stock which they are trading. It’s always worth keeping in mind that a stock doesn’t always react in the way that one might necessarily expect. Let’s say that a company has just endured a tough quarter, and has reported a significant drop in underlying sales. The natural assumption would be that the stock price of the company in question would therefore fall – after all, the company has clearly had some issue affecting it over the past three months.

However, if at the same time as the company announced the figures for the previous quarter they also announced that they were planning on embarking on a substantial share buy-back, there’s a significant chance that the stock price would soar, despite the bad quarter. Traders who were only aware of the first piece of publicly available news and not the second could potentially lose money because the stock price might well have gone in the opposite direction to what they were expecting.

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