What is Share Trading?
Find out what share trading is and how it works.
Trading Shares – The Basics
Getting listed on the stock market is one way for a privately held business to raise money for expansion. The procedure includes an IPO, also known as an initial public offering, which, in actuality, means that investors receive ownership units, known as shares, in exchange for money.
Major exchanges like the Nasdaq or the London Stock Exchange (LSE) are preferred by businesses looking to go public, but in order to be accepted, they must meet certain criteria. A company’s shares can be traded on a stock exchange once they are listed.
The first stock exchanges were established in trading centers like London and Amsterdam in the 16th and 17th centuries. The Philadelphia Stock Exchange, still in operation today, was the first stock exchange as we know it today. Shares didn’t begin to be widely traded, though, until the New York Stock Exchange was established in the late 18th century.
Prior to 1792, brokers and merchants had an unwritten agreement to gather on Wall Street under a buttonwood tree to coordinate the buying and selling of shares. The Buttonwood Agreement marked the start of contemporary financial trading.
Who Trades Shares?
Derivative trading made it possible for investors to trade stocks without an exchange because it allows anyone with internet access to make predictions about the value of specific shares through an account with an online broker. Let’s look more closely at the participants in this market since there are billions of transactions occurring there every day:
1- Private traders
This group includes people who solely pursue financial gain by buying and selling shares all over the world based on their own assessments of the price. The majority of share trading worldwide is conducted by private investors, including, for example, employees who purchase stock in the company for which they are employed and sports fans who purchase stock in their preferred team to show their support.
2- Hedge funds
Hedge funds are also heavily engaged in the trading of shares, usually by buying shares across a varied spectrum of companies in order to protect their portfolio from risk and increase their performance.
3- Competitors
A lesser known category of participants in the shares markets are competitors who may attempt to gain influence over another company by buying their shares.
Are You Ready To Trade Shares Live?
What Affects The Prices Of Shares?
A company’s earnings and dividend payments to shareholders are essentially represented by a share price. The ability of a company to turn a profit today and, by extension, the value of its stock, cannot be explained by a single factor alone. The prices of shares around the world are being shaped by a large number of interrelated factors. Let’s examine the main factors that influence various industries in more detail:
About Forex
Exchange Rates
The value of currencies in relation to one another changes around the clock. Generally speaking, importers gain when their country’s currency appreciates because their purchasing power increases as well.
Oil Prices
Companies who are dependent on oil for the conduction of their business, such as airlines, are the first to be affected by significant or unexpected changes in the price of oil.
New Legislation
Let’s take tax policy for example. Should a country change its laws on corporate tax, this will have a direct effect on the profitability of the companies based in the territory.
Interest Rates
Interest rates are determined by the central banks and reflect the cost of capital. A cut in interest rates, for example, can give stock markets a significant boost.
Expectations & Rumors
Even when a certain event, like a reduction in interest rates, doesn’t actually occur, the stock markets can still change significantly as a result of the anticipation. Should the event not occur, the markets will resume trading at their regular levels. That is the exact origin of the proverb “buy the rumor, sell the fact.”
Unpredictable Events
Terrorist attacks and natural disasters fall under this category. The stock markets crashed as a result of the terrorist attacks in September 2011, with the Dow Jones losing as much as 7% the day after the tragic incident.