The stock market is full of opportunities for each trader, with over 10,000 stocks and ETFs to choose
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| How to buy and trade shares |
Learn how the stock market works
The stock market works the same way as the auction - buyers and sellers negotiate the price that is convenient for each of them to exchange with an asset, which in this case represents the shares of the companies.
Companies wishing to raise capital will list their shares through a process known as IPO. Once these companies' shares are public, individual and institutional investors can start trading shares.
Individuals who believe that the company will see strong growth will buy shares, hoping that their price will be low so that they can make a profit when they sell them later. While individuals who believe the company will face difficulties may sell shares, to do as much as possible for their shares to make profits or limit losses.
You should be registered to trade directly on the stock exchange, so most people will resort to a broker on the exchange. In the case of leverage trading, your provider will replace the broker - in opening and closing positions based on your instructions. Today, most stock retail trades are conducted through online trading platforms.
What moves the price of shares?
Initially, the company will determine the price at which it will list on the stock exchange - known as the IPO price. Thereafter, fluctuations in the share price occur due to changes in the stock's supply and demand.
There is always a limited offer of shares of the company. The company can decide to issue more shares or buy back shares from investors to reduce the offer, but the number of shares traded is always known.
If there are more buyers than sellers on the market, demand will rise and the share price will rise. But if there are more vendors in the market indicating a drop in demand, the share price will fall.
There are several reasons why stock demand fluctuates over time, including:
Profit reports. Companies usually issue progress reports on their financial performance once a quarter and a full report once a year. These reports affect the company's share price as traders and investors use figures including revenue, profits, and stock returns (EPS) as part of their basic analysis
Macroeconomic data. The economic situation in which the company operates will affect its growth. Data releases such as GDP and retail sales can have a significant impact on corporate stock prices - strong data can cause stock prices to rise, while weak data can lead to declines
Interest rates. If interest rates are high, individuals will not need to take significant risks to get good returns and can save instead, which could cause the stock market to see less investment. So if the central bank is likely to raise interest rates, demand for stocks could fall.
Market sentiment. Stock price movements are not always based on basic analysis. An overview, as well as market participants, of a particular stock, can also cause volatility in demand. So speculative bubbles are formed
Know the difference between buying shares and speculating on their prices
Before you can open a position on a stock, it's important to understand the difference between how a stock buys and how to trade on its price movements. The main differences between these two methods are the time frame within which centres are retained, and the means of profit.
Buy Shares
Traders buy shares directly in the hope that their price will rise and they can be sold later for a profit. They thus perform the traditional rule of buying at a low price and selling at a high price - this is known as long. Traders may also open positions for a longer period, trying to profit from changes in share prices and also from dividend payments.
Speculation on share price
Traders use derivative products that take their value from the base market price. These do not require traders to own shares, and while traders do not enjoy shareholder rights or receive profits, they can open positions of profit from both low and high prices. Traders tend to retain positions in the short to medium term and focus on small market movements.
Build a plan for equity trading
A good trading plan can be very useful for trading stocks or investing in stocks because it will determine exactly what your goals are, how much capital you have at your disposal, and how much you want to risk.
The aim of the trading plan is to keep emotions away from making decisions, as well as provide some structures when opening and closing your positions.
Understand risks and costs
When you own equity, your risks are always limited to your initial expenses. If you want to invest $1000, all you can lose is $1000 - even if the share price falls completely to zero. You will also be charged for opening and closing any center.
The risks associated with trading are very different. CFDs use leverage, a feature that enables traders to open a position with only a fraction of the initial asking price of investors. While leverage increases your profits, it can increase your losses.
There are tools that traders can use to manage these risks, such as stop-loss requests, that enable them to identify a certain point for closing trades that move against them. Regular and graded stops can be affected by slips, i.e. when market volatility causes a discrepancy between the price you have requested and the price at which your provider can perform trading. However, you can protect yourself from slipping by attaching the guaranteed stop request for losses.
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