AN INTRODUCTION
TO SHARES

Companies listed for public trade offer shares, also known as equities, can be purchased and sold on exchanges such as the New York Stock Exchange (NYSE) and other financial stock markets.

Stock prices are ever changing, and their values can be influenced by a variety of factors. Major influences include company profits, industry news and analyst ratings. Supply and demand play a critical role in price fluctuations, with all of the above affecting demand, and in some cases, supply.

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IS THERE A DIFFERENCE BETWEEN EQUITIES, STOCKS AND SHARES?

As terms, equities and shares are used almost interchangeably. They both refer to investing in the stock market, representing ownership (of a company or entity) that is traded on an exchange.

By definition, equity is ownership of an asset or portion thereof once all debt is paid, and stock typically refers to the trading of this equity and represents equity investment. Most stock purchases are made expecting a return of some kind, often in the forms of dividends.

There is a difference between buying the stocks themselves, and trading on them. Trading stocks involves opening positions in line with the direction that they expect specific stocks to take. This is done through a trading platform such as One Financial Markets, where individuals can profit on the movements of the stock market without physically owning any of the stocks themselvess

ONE FINANCIAL MARKETS SHARE CFD PRODUCT DETAILS

Region Number of shares
US 271 See more
Name Symbol Minimum Commission (USD) Commission (Basis Points) Margins from Trading hours Timezone Platform
UK 141 See more
Name Symbol Minimum Commission (GBP) Commission (Basis Points) Margins from Trading hours Timezone Platform
EU 46 See more
Name Symbol Minimum Commission (EUR) Commission (Basis Points) Margins from Trading hours Timezone Platform

Stocks operate on a tiered margin basis, please click here for more details.

HOW TO TRADE EQUITIES AND SHARES

A company’s share price is largely influenced by investors’ impression of how it is faring. Traders buy certain shares when they expect their prices to rise, thereby potentially profiting on the positive difference between opening and closing values of a trade. Of course, no one knows for sure which direction the market will take, but there are signs that may suggest higher probabilities of certain outcomes.

Trades in line with correct guesses prove profitable, while bad trades bring a loss when the position is closed. While some professional traders may keep a position open in the hopes that a share’s price will recover, this can be a risky move as there is no guarantee that it will go back up instead of falling further down.

Traders may also sell a stock before an expected price drop with the intention of buying the shares back at a lower price, thereby making a profit. Should the opposite happen, and the stock actually rises in value, the trader sees a loss when he closes the position.

Although trading is always technically guesswork, investors make educated guesses by staying up to date with news events regarding the companies whose stocks they have an interest in trading. Research is key to success in equities trading.

SHARE CFD TRADING EXAMPLE

Trade 1 – Profit making ‘Long’

  • Trader buys ‘long’ 100 x Apple CFDs at a price of $200 (Point A) expecting shares to rise.
  • Deal size = 100 x $200 = $20,000. Deposit required = $4,000 (20%).
  • Shares rise 16.5% to $233 (Point B).
  • Trader closes position, books $3,300 profit ($20,000 x 16.5%).

Trade 2 – Loss making ‘Long’

  • Trader buys ‘long’ 100 x Apple CFDs at a price of $233 (Point B) expecting shares to rise.
  • Deal size = 100 x $233 = $23,300. Deposit required = $4,660 (20%).
  • Shares fall 14.2% to $200 (Point C).
  • Trader closes position, books $3,300 loss ($23,300 x 14.2%).

 Trade 3 – Profit making ‘Short’

  • Trader sells ‘short’ 100 x Apple CFDs at a price of $233 (Point B) expecting shares to fall.
  • Deal size = 100 x $233 = $23,300. Deposit required = $4,660 (20%).
  • Shares fall 14.2% to $200 (Point C).
  • Trader closes position, books $3,300 profit ($23,300 x 14.2%).

 Trade 4 – Loss making ‘Short’

  • Trader sells ‘short’ 100 x Apple CFDs at a price of $200 (Point A) expecting shares to fall.
  • Deal size = 100 x $200 = $20,000. Deposit required = $4,000 (20%).
  • Shares rise 16.5% to $233 (Point B).
  • Trader closes position, books $3,300 loss ($20,000 x 16.5%).
apple-mt5-chart

IMPORTANT THINGS TO REMEMBER WHEN TRADING SHARES

The standard trading advice of “buy low, sell high” may sound great on paper, but in reality, the market does not always provide an ideal trading scenario. Instead, while keeping your chosen strategies in mind, it is wise to respond to market movements with a note of caution. It may be better to take a small profit where you can, as opposed to risking a huge loss further down the line.

1. Respond Quickly
It is important to remember that price swings can occur suddenly due to the volatility of the stock market and the rate at which newsworthy events take place. Sometimes profit and loss can be separated by mere seconds, thus traders need to be able to read the situation and act in accordance in order to minimize losses.

Mobile applications can make it easier to monitor such events and take appropriate action when it comes to your open positions. Ensure that you have put adequate measures in place should you foresee that you may be unavailable for some time and unable to access your trading portfolio.

2. Know Your Limits
Before opening any trade, decide on the maximum amount or percentage of the trade that you are willing to lose should things go wrong, or at what point you aim to take profit should things go well.

Although it might be tempting to change these markers during the trade, the best strategy is to stick to the initial limits you had set out for yourself, in order to prevent losses caused by emotional trading decisions. Remember that a small loss is easier to swallow than a substantial loss that could have been prevented by better decision-making.

ONE FINANCIAL MARKETS: AN ONLINE TRADING PLATFORM FOR EQUITIES AND SHARES

One Financial Markets is a reputable trading platform perfect for all traders interested in getting into equities trading. To get a feel for our platform as well as the market and its movements, we recommend starting with a demo account where you can open trades using virtual money. One you have built a strong knowledge base around the stock market and are comfortable with equities trading, sign up for our free live trading account.

DO YOU HAVE ANY QUESTIONS ON Shares ?

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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 67% 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.

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Office network
  • London Office
    One Financial Markets
     

    20 Midtown
    20 Procter Street
    London
    WC1V 6NX
    United Kingdom


    T: + 44 ( 0 ) 203 857 2000
    E: info@ofmarkets.com
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    VI Markets 
    Sharq - Mazaya Tower 02 - 10th floor 
    PO BOX 3040
    22031
    Salmiya, Kuwait   

    T:
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    E: info@vimarkets.com.kw
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    Office 1404
    Ubora Tower
    Business Bay
    P.O. Box 31482 Dubai
    United Arab Emirates


    T:
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    E: info@ofmarkets.com

One Financial Markets is the trading name of C B Financial Services Ltd, a company registered in England with company number 6050593. C B Financial Services 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).

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