The basics of share trading

Interest in share trading is growing again: low yields on bonds, life insurance and fixed-term deposits as well as latent inflationary risks make investments in real-economy holdings as attractive as active trading. Shares are among the most widespread trading instruments and millions of shares are bought and sold every day worldwide.

Via European brokers, private investors can trade on all relevant stock exchanges in the world. In particular, costs on European and North American stock exchanges have fallen significantly in the last ten years. In addition, many brokers have upgraded their over-the-counter trading, which has tended to lower costs in trading certificates and warrants.

Thorough preparation for share trading

Stepping onto the trading floor is not rocket science for private investors in https://exnessgroup.org/mt4/, but it does require thorough preparation. First, the role of the equity portfolio in private wealth planning must be determined, taking into account existing assets. Then strategies should be found with which the envisaged goals can be achieved. The time required, previous knowledge, risk tolerance, etc. must be taken into account. Finally, it is important to acquire the necessary basic knowledge about the stock market.

How does stock trading work?

Shares are shares in the equity of a company that is listed on the stock exchange. Those who own shares are co-owners of the company to a certain percentage and, as shareholders, receive dividend payments and/or voting rights when it comes to company decisions. As with all other financial products, prices are determined for shares that apply to the purchase or sale of a security. These are updated on an ongoing basis. The price is determined by supply and demand - a stockbroker compares all buy and sell orders and calculates a price that secures the most turnover.

Share prices are therefore influenced by supply and demand, but what influences supply and demand? These include economic and political developments, company annual reports or even a change in company management.

What are the arguments in favour of investing in shares?

In the long term, shares promise a significantly higher return than bonds and fixed-interest investments. This can be impressively proven by various studies. A meta-study by the DAI, for example, lists an investigation of stock returns in Europe for the period from 1900 to 2000 - a century with two lost world wars, currency reforms, and hyperinflation. The real, i.e. inflation-adjusted, return on european equities reached 3.6 % per year during this period. By comparison, bonds suffered a real loss of 2.2 % per year in the same period.

The most important facts at a glance

• Shares are interests in the equity of a company
• Shareholders are co-owners of a company
• Shareholders receive dividend payments and/or voting rights
• The share price is determined by supply and demand