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The stock market works much in the same way as an auction – buyers and sellers negotiate a price that they are both comfortable exchanging for an asset, in this case shares of companies.
Companies that wish to raise capital will list their shares through the process known as an initial public offering (IPO). Once their stock is public, individual investors and institutions can start to trade the shares.
Individuals who believe that a company will see strong growth will buy the shares, hopefully for a low price so that they can make a profit when they sell it at a later date. While individuals who believe a company will face trouble would sell the shares, aiming to make as much as possible for their shares so that they turn a profit or cut a loss.
You have to be registered to trade directly on an exchange, so most people will go through a stockbroker. In the case of leveraged trading, your provider will take the place of a broker – opening and closing positions based on your instructions. Today, the majority of retail stock trading takes place via an online trading platform.
Initially, a company will set a price at which it will list on a stock exchange – known as its IPO price. After that, fluctuations in the share price are caused by changes in the supply of and demand for the stock.
There is always a limited supply of a company’s stock. A company can make the decision to issue more shares, or buy back shares from investors to reduce supply, but the number of shares in circulation is always known. If there are more buyers than sellers on the market, then demand grows and the share price will rise. However if there are more sellers on the market, indicating a fall in demand, then the share price will decline.
There are a number of reasons that the demand for a share can fluctuate over time, including:
Earnings reports. Companies usually release interim reports on their financial performance once every quarter and a full report once a year. These influence the company’s share price as traders and investors use figures including revenue, profit and earnings per share (EPS) as part of their fundamental analysis
Macroeconomic data. The state of the economy a company operates in will affect its growth. Data releases such as gross domestic product (GDP) and retail sales can have a significant influence on company share prices – strong data can cause them to rise, while weak data can cause them to fall
Interest rates. If rates are high, individuals won’t need to take big risks to get healthy returns and can save instead, which may cause the stock market to see less investment. So if it looks like a central bank is likely to raise interest rates, demand for shares may fall
Market sentiment. Share price movements aren’t always based on fundamental analysis. The view that the public, as well as market participants, have on a particular stock can also cause demand to fluctuate. This is how speculative bubbles are formed
Before you can take a position on a share, it is important to understand the difference between how to buy a share, and how to trade on its price movements. The main differences between these two methods are the timeframe that the positions are held over, and the means of making a profit.
Investors buy shares outright in the hope that they will increase in price and can be sold at a later date for a profit. They uphold the traditional mantra of buying low and selling high – known as going long. Investors will take positions over a longer period of time, attempting to profit from share price changes as well as dividend payments.
The requirements for opening a Forex account have become simpler since the growth of online Forex trading. Today, opening a brokerage is almost as simple as opening a bank account. Many brokers allow you to open one quickly online.
With AM BROKER, you can invest in shares by Trading ETFs. These funds can be used to invest in multiple shares at once, such as entire indices or sectors.
Traders use derivative products that take their value from the price of the underlying market. These do not require traders to own the shares so, while traders will not have shareholder rights or receive dividends, they can take a position to profit from both falling and rising prices. Traders will tend to hold positions over the short to medium term and focus on smaller market movements.
You can trade shares with AM BROKER by CFD trading. This method has many of the same benefits as spread betting – including out-of-hours markets, and the ability to go both long and short.
You can make profit share trading by correctly predicting whether a company’s stock will rise or fall in value.
If you are investing in shares, you could only profit by going long. However, if you decide to trade shares with derivative products, you could take advantage of falling market prices by going short.
You can trade shares online via the MetaTrader 5 trading platform, which offers you a fast and smart way to trade via your desktop, mobile or web browser. You will have full dealing functionality and be able to open, close and edit positions with just a few clicks. Beside shares, you can trade stock indices, ETFs, but also forex and commodities.
Beginners can start trading or investing in stocks by learning as much as possible about the market before they open a position. One way to do this is to take a look at AM BROKER’s education, including online courses, articles and tutorials.
Another way for beginners to gain confidence trading stocks is by opening an AM BROKER demo account. They can build their strategy in a risk-free environment by practising trading with £10,000 in virtual funds.
The best way is to use a Welcome Bonus account, where you can trade shares with real money in the real market and gain experience before investing your own money.
The costs of share trading depend on whether you decide to trade CFDs on stocks or indices. If you trade indices, the costs of each trade are factored into the spread – which is the difference between the bid and ask prices. For CFDs on shares, you’ll be charged a commission also, starting from 1$ per trade for US stocks. There are other charges to consider, such as overnight funding.
AM GLOBE SERVICES LTD (AM BROKER) would like to inform you that the services and products described on this website are not offered to citizens of E.U. member states, The United States, Canada, Japan, Turkey, and Australia.