Trading shares online for beginners is an ongoing learning experience. You can speed up the learning curve with the following five insights and tips for trading shares. These are some of the insights that market insiders use to give them an edge.

1.A good company doesn’t mean it’s a good stock

Often companies that provide great products and services make poor investments. They are sometimes worth trading, but not always. There are couple of reasons that a great company doesn’t always make for a great stock.

In some cases, the reason customers like a company are because shareholders are subsidizing the costs. This is the case with Uber, which many customers love. The problem for shareholders is that the company is subsidizing costs to undercut competitors. Uber loses money on every trip, so the more trips it does, the more shareholders lose.

Another reason is that great companies, become popular with customers, and that attracts competition. If the company doesn’t have an effective moat, its margins will be eroded until there is nothing left for shareholders.

This doesn’t mean great companies are never great stocks. If a company has something unique that can’t be replicated—like Apple, Nike and Google do—then it can be a great investment. But don’t assume a good company will make a good investment.


2.Overvalued companies can go up a lot

The best stocks frequently become overvalued. But that doesn’t mean its time to sell them. Bubbles can last for years, both across entire markets and for individual stocks.

Fund managers are often wary of buying stocks that they think are overvalued. But eventually, they capitulate and buy them because their clients begin asking why they don’t hold the top-performing shares. Others sell stocks they believe to be overpriced, only to buy them back at even higher prices when they realize they got it wrong. This process can keep a stock price rising for years.

So, when you hear a stock is overvalued, it doesn’t mean you need to avoid it. It does, however, mean you need to be careful, because eventually it may decline a lot. Expensive shares just need to be managed carefully.

3.You need to embrace risk

Novice traders often make the mistake of doing too much to avoid risk. The truth of the matter is that you must accept the risk to be rewarded. Experienced traders love it when market volatility increases, because risk and opportunity both come with volatility.

The goal isn’t to avoid risk, but to find opportunities with a great reward to risk ratios. The more extreme a price move, the larger the potential reversal will be. A stock with momentum can generate much larger profits than a stock that is moving steadily. Both situations entail more risk, but they also carry the opportunity for disproportional profits.

When traders start out, they will often use very tight stops to reduce potential loss. The problem is that the tighter the stop, the more chance there is of it being hit. While they may be reducing the risk on an individual trade, they will end up with a string of small losses, with very few wins to offset those losses.

Risk does need to be managed, but it also needs to be embraced. This can be done with smaller positions and by diversifying across stocks and timeframes.

4.You don’t need to be in the market all the time

This applies to short-term traders rather than to investors. Expert traders wait for the best opportunities. Some days they might trade several stocks and execute hundreds of trades, and other days they might not do a single trade.

Experienced traders also very seldom use their maximum buying power. Most days they will be trading with 20 to 30% of the capital they have available. The rest is reserved for the days that offer exceptional opportunities.

Not only does this preserve capital for most profitable days, but it preserves psychological capital. The best trades come along a few times a year, and when they do you don’t want to be mentally exhausted from trading difficult markets.

5. Choose the right stocks

On any given day there may be just a handful of stocks worth trading. Pro traders create a new watchlist every day and focus on the stocks that most likely to offer good reward to risk trades.

So, how do you choose stocks to trade? Your watchlist should contain the stocks likely to move the most. Stocks with higher than average volume are more likely to move. Stocks with rising volatility are also worth watching.

Companies releasing earnings, particularly eagerly anticipated results also have potential to move. Whenever there is significant news about a company it is worth watching. Shares are usually tradable for three to five days after a news or earnings release. If a stock has broken out of a tight trading range or has broken a major technical level it may offer opportunity.

All content is provided for your information only.

This article may contain opinions and is not advice or a recommendation to buy, sell or hold any investment. No representation or warranty is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however we have put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing.

One Financial Markets expressly disclaims all liability from actions or transactions arising out of the usage of this content. By using our services, you expressly agree to hold One Financial Markets harmless against any claims whatsoever and confirm that your actions are at your sole discretion and risk.

Begin trading today! Create an account by completing our form

Privacy Notice

At One Financial Markets we are committed to safeguarding your privacy.

Please see our Privacy Policy for details about what information is collected from you and why it is collected. We do not sell your information or use it other than as described in the Policy.

Please note that it is in our legitimate business interest to send you certain marketing emails from time to time. However, if you would prefer not to receive these you can opt-out by ticking the box below.

Alternatively, you can use the unsubscribe link at the bottom of the Demo account confirmation email or any subsequent emails we send.

By completing the form and downloading the platform you agree with the use of your personal information as detailed in the Policy.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75.5% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Back to top

Office network
  • London Office
    One Financial Markets 

    1 Finsbury Market
    EC2A 2BN
    United Kingdom

    T:  + 44 ( 0 ) 203 857 2000
  • Dubai Office
    One Financial Markets 
    OT19-39 Central Park Tower
    Dubai International Finance Centre
    United Arab Emirates
    T: + 971 44 22 888

One Financial Markets is the trading name of Axi Financial Services (UK) Ltd, a company registered in England with company number 6050593. Axi Financial Services (UK) Ltd is authorised and regulated by the Financial Conduct Authority in the UK (under firm reference number 466201) and the Financial Sector Conduct Authority in South Africa (with FSP number 45784).

The information on this site is not directed at residents of the United States, Belgium, Poland or any particular country outside the UK and is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation. is owned and operated by Axi Financial Services (UK) Ltd.

Award winning broker
We have been presented with a number of awards that recognise the quality of our service and dedication to our clients :

Best FSA Regulated Broker
Saudi Money Expo

Best Education Product
Saudi Money Expo

Best Broker - Online Trading
IAIR Awards

Best Institutional Broker
Saudi Money Expo

Best FX Services Broker
CN Forex

Top International
FX Broker 2015

Saudi Money Expo

Broker of the Year
Online Trading – Middle East

IAIR Awards

Best Forex
Customer Service 2018

JFEX Awards

We accept the following payment methods: