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Learning to trade Share CFDs
Stock trading has been around for centuries and is still the most common way for traders, banks and funds to buy and sell a company’s shares. The first actual stock exchange started trading in London in 1773 and today the market capitalisation of traded stocks worldwide is estimated at more than $70 trillion.
An introduction to share trading
Share dealing & investing
The ‘traditional’ method of buying and selling company shares sees an investor purchase a stock and wait for an increase in the value, in the hope of making a profit. This relative long-term strategy means you hold the stock for a period of time so to have partial ownership in that company.
Buying and holding stocks allows you to potentially take advantage of a growing economy in companies you want to own over the long term. The returns from investing in stocks historically outweighs those of holding money in lower return assets like cash.
Buying stocks may help you weather losses in other investments you have, as you can spread your risk across different asset classes and sectors of the economy.
Some stocks will provide income in the form of dividends even if the stock has lost market value. You can use this income to fund other investments or reinvest.
Share trading derivatives
The huge rise of simple financial derivatives based on an underlying market have opened up financial markets to a mass of people who may not have accessed them before.
Share spread betting allows traders to simply speculate on whether a stock price will move up or down. You're betting on a range of possible outcomes.
Share CFDs are based on the underlying market where traders buy or sell contracts which represent an amount per point in that share price. This is similar to what you do when share investing, but you do not have any ownership of the company.
Share CFDs and spread betting use leverage which means you can gain exposure to a stock without putting up the full cost of the position at the outset. This can free up a trader’s capital as less funds are needed upfront to benefit from full market exposure. Profits can be magnified compared to the initial outlay. This also implies that losses can exceed the initial deposit.
Opportunities in rising and falling markets
Trading on leverage allows you to go ‘long’ (buy) if you think prices will rise and also go ‘short’ (sell) if you think prices will fall. Remember, you're not buying the physical share but speculating on the price movement. This may also have tax benefits.
Tradiso doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information provided here, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. We advise any readers of this content to seek their own advice. Without the approval of Tradiso, reproduction or redistribution of this information isn’t permitted.