The share market is one of the best ways to gain exposure to the equity markets. They allow you to speculate on the direction of individual share prices as opposed to the broader markets. You can use several strategies to trade the share markets including fundamental, technical and market neutral methods. There are also several ways to execute trades. One of the most popular is through CFDs.

What are Shares?

A share is an ownership in a company. Many organizations list their companies on major exchanges such as the New York Stock Exchange or the NASDAQ. When a company wants to raise capital, but they don’t want to borrow money, they will consider giving up a portion of their ownership by listing shares. Share prices can be liquid, but also volatile. Some of the largest companies in the world, such as Apple or Amazon, provide liquidity that will easily allow you to enter and exit a position. These shares can also be volatile. Following an earnings release or after surprise news, the price of these stocks can whipsaw.

Where Can you Trade Shares?

Shares are available on several different platforms. You can trade them through a stockbroker or through a CFD and forex broker. There are benefits to both. Shares that are traded through a stockbroker provide you ownership of the actual share. This can provide you with a dividend(if the company pays one). CFD brokers provides contracts for differences on shares. While you don’t own the shares, you could benefitfrom the change in the movement of a stock price. CFDs also provide you with leverage, allowing you to post a fraction of the capital that would be needed compared to owning the shares. Both types of brokers offer many shares by industry.

What Types of Share Trading Strategies Can You Use?

There are several different trading strategies you can use to trade the share market. Fundamental analysis is the study of the value of the shares. You can determine if a share is properly valued using different metrics such as earnings per share, the PEG ratio or cash flow. Most major companies release earnings 4-times a year, providing investors with profits, revenues and future forecasts.

A second type of analysis is called technical analysis. This is the study of historical prices. If you believe that all the current available information is incorporated into the price of a share, then without new information, the change in price will likely be repeated. By studying patterns, support and resistance or momentum, you can determine the future movements of share prices.

Lastly, you might consider a market neutral strategy that is based on the relative performance of one share compared to another. This strategy does not fluctuate with the broader markets. You can execute a market neutral strategy by purchasing one share and selling another.

Summary

Shares are listed by companies as partial ownership. Shares will fluctuate and can be volatile. There are several types of analysis that you can use to determine the future price of a share, including fundamental and technical analysis. You can trade shares through a stock broker or a CFD broker, depending on the strategy and you can leverage potential returns.