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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.
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.

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.
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.
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