Share trading refers to investing in a publicly listed company or corporation by purchasing a number of that company’s shares, also referred to as stocks. A company’s shares become available for trading once it has completed an Initial Public Offering (IPO) and can be purchased on the stock market. When share trading, an investor’s success is intrinsically linked to that of the company they have invested in. When news surrounding the company is positive its share price rises, providing profit for the investor. On the other hand, when things are not going well for the company, its stock price will fall and investors will experience losses.
How to Buy and Sell Shares Online
Although share trading was traditionally conducted on physical exchanges, where transactions were made on a trading floor, the growth in online trading means that a large percentage of share trading is now conducted digitally.
The introduction of financial derivatives such as Contracts for Difference (CFDs) has also enabled retail traders of all sizes to speculate on the stock market, without taking actual ownership of company shares. CFDs allow traders to invest in company shares with less initial capital through the use of financial leverage. An added benefit of share trading using derivatives is that, as an investor is simply speculating on the price of a company’s stock, they can trade both rising and falling markets, providing additional investment opportunities. Furthermore, as there is no ownership of the underlying asset, investors are able to avoid the charges associated with traditional share trading, while still benefiting from dividend payments.
Through using a broker that offers share dealing, such as London Capital Group (LCG), investors can buy and sell shares in a range of global companies online, from a single trading account. If a trader expects that a company’s share price will rise, they go long (buy). Alternatively, if the expectation is that the stock price will fall, they can go short (sell).
Share trading through CFDs can be profitable, however, there are risks involved that investors should be aware of before entering the market. There are also a number of factors that can influence company stock prices, which are important for investors to know if they want to be successful.
Factors That Affect Share Prices
Part of learning how to invest in shares involves understanding the range of factors that can affect the value of a company’s stock. Investors that experience the most success in share trading are those that have comprehensive experience of how the stock market moves and why, as well as in-depth knowledge about the companies they are investing in.
Positive Earnings Reports
The release of a company’s earnings report is a major contributor to the performance of its share price. Reports that come in above previous data or beat expectations in areas such as revenue and profit can send a company’s stock price climbing. On the other hand, poor figures can have a significantly negative impact on share price.
News that a company is preparing to launch an innovative or revolutionary new product can also have an impact on share price. Such announcements can lead to positive expectations for a company’s future financials and thus lead to a rise in stock value. If, however, a new product announcement is met with a lukewarm or negative reception, the company’s shares will suffer.
Senior Management Changes
Changes in senior management personnel can have a major effect on a company’s share price. People in these positions have a large say in how a company moves forward strategically and the business choices that are made. Incoming individuals that are experienced and widely respected in the company’s industry can boost share price due to the optimism surrounding their appointment. However, a company that suffers from constantly changing personnel may be seen as unstable or in trouble, which could lead to its share price falling.
General Industry News
Outside of company-specific announcements, general news from the industry a company inhabits can also affect share price. If for example, strict regulations are announced governing a specific product or industry that relates to the company in question, this could lead to a dip in stock price, as investors become pessimistic about the company’s future earning potential.
Keeping informed about the latest news and announcements surrounding the industries and companies an investor is interested in is one of the most important parts of learning how to invest in shares successfully.