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Stock trading explained: How to trade stocks
Learn more about stock trading, from how stock exchanges work and what drives prices to different trading strategies and instruments. Continue reading to find out how to trade stocks via CFDs on Capital.com.
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Shares trading guide
Stock trading involves the buying and selling of company shares listed on a stock exchange. The goal is to potentially profit from price fluctuations, although all trading and investing carry inherent risks of losses.
Trading a stock means traders aim to buy shares at lower prices, hold them for a specific period, and then sell them at higher prices. This distinguishes stock trading from stock investing, where investors typically buy and hold shares for the long term.
In stock trading, you can choose to purchase actual shares or trade derivatives of the underlying asset, such as stock contracts for difference (CFDs), to speculate on share price movements.
This guide explores how to trade stocks and outlines various stock trading strategies that you can consider.
What is stock trading?
Stock trading involves purchasing and selling company shares listed on a stock exchange. The primary goal is to potentially profit from price fluctuations, although it's important to recognize that all forms of investment or trading carry inherent risks of losses.
When traders trade a stock, they aim to buy shares at lower prices, retain them for a specific duration, and then sell them at higher prices. This practice sets apart stock trading from stock investing, where investors typically buy shares with the intention of holding them over the long term.
When traders trade a stock, they aim to buy shares at lower prices, retain them for a specific duration, and then sell them at higher prices. This practice sets apart stock trading from stock investing, where investors typically buy shares with the intention of holding them over the long term.
Difference between stocks and shares
In a general sense, "stocks" refer to the ownership units of a particular company. When you own stocks of a company, you own a portion of that company. Stocks can be traded on stock exchanges, bought, and sold by investors."Shares" specifically refer to the units of ownership into which a company's capital is divided.
For example, a company may have a total of 1,000,000 shares outstanding, and each share represents a fraction of ownership in the company. Shareholders hold shares as evidence of their ownership stake in the company.
For example, a company may have a total of 1,000,000 shares outstanding, and each share represents a fraction of ownership in the company. Shareholders hold shares as evidence of their ownership stake in the company.
Different types of stocks
Growth stocks are shares of companies expected to grow faster than the average company, typically reinvesting earnings rather than paying dividends. Investors buy growth stocks primarily for their potential for substantial capital appreciation. These stocks may have higher volatility and risk.
Value stocks are shares of companies that are considered undervalued relative to their fundamentals, such as earnings, dividends, and book value. Investors look for value stocks based on metrics like low price-to-earnings (P/E) ratios or low price-to-book (P/B) ratios, anticipating that the stock price will eventually rise as the market recognizes the company's true value.
Value stocks are shares of companies that are considered undervalued relative to their fundamentals, such as earnings, dividends, and book value. Investors look for value stocks based on metrics like low price-to-earnings (P/E) ratios or low price-to-book (P/B) ratios, anticipating that the stock price will eventually rise as the market recognizes the company's true value.
What is stock trading? Stock traders seek to purchase shares at lower prices, retain them for a specific duration, and subsequently sell them at higher prices. This distinguishes stock trading from stock investing, where investors buy shares with the intention of holding them over the long term.
FAQ
TradingView can be used on various devices, including:
- Desktop: It supports web browsers on Windows and macOS platforms.
- Mobile: TradingView has mobile apps available for both iOS (iPhone, iPad) and Android devices.
- Tablet: It is accessible on tablets running iOS or Android operating systems.
Connect Brokera to TradingView to trade CFDs or place spread bets (only available in the UK) with the help of advanced charts. Both products enable you to open long or short positions with just a fraction of the value of your trade – a concept known as leveraged trading. As a result, you can open larger positions and gain greater exposure to global financial markets. However, you are also exposed to risk, as leverage can magnify both profits and losses. That’s why it’s important to apply risk-management tools when trading these products.
CFDs exchange the difference in price from the point at which the contract is opened to when it is closed.
Spread betting stakes an amount of money per point of price movement in the underlying asset, and is tax-free. This product is only available in the UK.
CFDs exchange the difference in price from the point at which the contract is opened to when it is closed.
Spread betting stakes an amount of money per point of price movement in the underlying asset, and is tax-free. This product is only available in the UK.
TradingView supports trading in a variety of financial markets through integrated brokerages. The specific markets available for trading can vary depending on the brokerage that you connect with through TradingView. Here are some common markets that are typically supported:
- Stocks: TradingView supports trading stocks listed on major stock exchanges around the world, such as NYSE, NASDAQ, LSE, TSX, and many others.
- Forex (Foreign Exchange): You can trade currency pairs in the Forex market, including majors, minors, and exotic pairs.
- Cryptocurrencies: TradingView allows trading of a wide range of cryptocurrencies. This includes major cryptocurrencies like Bitcoin (BTC), Ethereum (ETH), as well as altcoins and tokens.
- Futures: Futures contracts on commodities (e.g., gold, oil, wheat), indices (e.g., S&P 500, NASDAQ), and other assets are available for trading.
- CFDs (Contracts for Difference): CFDs are available for trading on various assets including stocks, indices, commodities, and cryptocurrencies.
- Options: Some brokerages connected to TradingView may offer options trading on stocks and other assets.
- Bonds: Depending on the brokerage, trading in government bonds and corporate bonds may also be supported.
- Indices: Major stock indices such as the S&P 500, NASDAQ Composite, Dow Jones Industrial Average, FTSE 100, etc., can typically be traded.
- Commodities: TradingView supports trading in commodities such as gold, silver, oil, natural gas, agricultural products, etc.
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