What is share trading?
Share trading is the buying and selling of company stock or products listed as company stock with the hopes of gaining profit. Shares represent a portion of the company ownership that is within a joint company. The ownership of a share, opens the opportunity to have a say in the company happenings. It can be seen as a public private partnership. The company sells its initial shares by an initial public offer (IPO) the company is then placed onto the shares market.
In other words, buying and selling of shares according to the value of the shares. The share market is also known as the stock market or capital market.
Why share trading?
Buying and selling shares/stocks is much riskier than simply keeping your money in a savings account. The main reason people take this risk is because the return on their capital is much higher. Comparing the interest rate average of 4% on an savings account, with share trading you can earn as much as 50% profit on your capital.
How does it work?
If you have ever watched a movie that involves ‘Wall street’, you might already know what share trading is. In South Africa, we have a stock market called the Johannesburg Stock Exchange (JSE) - see below. Having a share in a company is like having a piece of the cake. Depending on the type of share owned and when the company is doing well, the shareholder is entitled to a portion of that company’s profit (also called a dividend). Share prices are affected by a few things including demand and profitability.
What is the JSE?
The JSE is the largest stock exchange in South africa. Share trading takes place when trades are being bought and sold through shares/stock that is listed on the JSE. The JSE can also be seen as the engine room of the South African economy. It is a gathering place of all the large commercial business companies and they come together not only for the sole purpose of increasing their own capital, but to improve the public capital. By trading shares, jobs are being created, products, services and opportunities.
Short term trading vs long term trading
Short term trading
These trades take advantage of the price movements that take place within the stock markets. Some trades only last a few minutes, depending on the purpose of the trade. This does not mean shares of property or a company is being thrown around. This simply means that the trader is taking advantage of a possible increase in the stock market and tries to make a quicker than usual profit on that specific share.
Long term trading
Traders hold positions for a longer term with hopes that the growth will continue. A price movement is likely to continue if the demand for that share is high and is growing higher.
2 Types of shares
Risk and reward
Investing in the stock market is a risk no matter what option you choose. However, there are less risky options and this is one of them. Commodities tend to be more risky than shares in platinum or gold or maybe even assets.
These shares are the most available stock in a company. Basically the trading of title holding which includes some of the benefits of partly owning a company.
What is a share/stockbroker?
A person specialising in the trading markets. This person is also seen as an agent as it is a requirement to have a stockbroker to participate in share trading.