How to Trade Equities


Equity trading is centred around the share price of a given company and this is influenced by the impression of how a company is faring. If a trader reckons that the share price will rise then they’ll buy, and if proved correct they will make a profit. However, if the trader is wrong and the share price drops, they will then see a loss if they close out the trade.


This is also the case when looking at the scenario inversely; should the trader think that the value of the stock will drop, they will try and sell the stock in the hope that they will have the opportunity to buy it back for a smaller amount and therefore make a profit. If, however, the stock moves in the other direction and starts trading at a higher level, the trader will incur a loss if they opt to close the trade, having purchased the stock for more than they originally sold.

Trading Times for Equities

Trading Times for Equities

Trading Times for Equities

Trading_Times

In the case of company stocks which aren’t listed on multiple indices across the world, traders will only be able to trade this stock during the trading hours of the specific index that lists it. So a trader with the intention of trading Royal Mail stock can only do this during the trading times of the UK FTSE 100 (08:30 - 16:30). It should be pointed out, though, that traders can place buy or sell orders outside of trading times, which can then be automatically initiated when the market re-opens.

A BUSINESS SCENARIO FOR EQUITIES TRADING

Equities_Trading

Experienced traders generally keep abreast of news concerning the businesses in which they have an open position, but that is not to say that the market will always respond to developments in the way that would normally be predicted.

So for example, let’s imagine that a company has just been through a difficult three month period, and announced a large drop in sales. You might conclude that the firm’s share price would drop as a result. Yet should the firm announce that they are planning to buy-back a significant number of shares simultaneously, then there’s a good chance that the stock price might actually increase. Traders who only focused on the news regarding the disappointing quarterly results could therefore possibly make a loss if the stock price moves in the opposite direction to the way which they assumed it would go.

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