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.

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.