How to trade shares?

The stock market is full of opportunities, whatever your level of experience. With IG, you have over 14,500 stocks and ETFs to choose from. Follow this step-by-step guide to start trading stocks.

You would buy a company's shares if you thought they were going to grow solidly. To make a profit, you would have to sell them at a higher price. If, on the other hand, you think a company is going to experience difficulties that could affect its share price, you may decide to sell it to lock in your current profits or limit potential future losses.

invest versus trade

Investing and trading are similar terms that are sometimes used interchangeably, but there are important differences between them.

• Investing in stocks means that you own the shares of a company. This will make you a shareholder and you will also have the right to obtain a share of the company's profits in case dividends are paid, as well as voting rights, if granted by the company
• Trading shares means that you trade in stock on the price movements of a share with derivatives such as CFDs and hedges without owning the asset itself.

What moves the stock price?

Before going public through an IPO, a company's shares will have a set price range that is usually determined by the IPO intermediary (usually a large bank). This range is established based on the expected interest in the listing, as well as the fundamentals of the company, including its revenue, products, and popularity.

When the IPO is complete, fluctuations in the stock price are caused by changes in the supply and demand for the stock. If the offer is higher than the demand, the share price could fall, while if the demand is higher, it could rise.

There is always a limited supply of shares of a company, which can make the decision to issue more shares, or to buy back shares from shareholders to reduce the supply. However, the number of shares outstanding will always be known.

There are several reasons why the demand for a stock varies over time, including:

• Earnings Reports – Companies typically release interim reports on their financial performance once a quarter and a full report once a year. These include the company's share price, as investors and shareholders use data such as revenue, earnings, and earnings per share (EPS) in their fundamental analysis.
• Macroeconomic data: The health of the economy in which a company operates affects its growth. Data releases such as gross domestic product (GDP) and retail sales have a significant influence on stock prices: strong data can drive them up, while weak data can drive them down.
• Market sentiment: Movements in a stock's price are not always based on fundamental analysis. The opinion of the public and market participants about a certain stock can also cause it to fluctuate: this is how speculative bubbles form.
• Interest rates: If interest rates are low, the stock market may see an increase in activity, despite the factors just mentioned. This is because more and more people can start trading stocks to make more profit than they would if they saved money in a bank account.

Learn to trade stocks

With IG, you can trade shares by trading on share price movements with derivatives such as CFDs and hedges.

• With CFDs, you can enjoy tight spreads and limit your maximum risk by setting guaranteed stops1 before opening your position. CFDs can also be used to hedge your stock portfolio against future losses.
• With barriers, which move point by point with the price of the underlying market, you can select your level of leverage and limit your total risk to the premium you pay to open the position.

CFDs and Barriers are leveraged products, so you won't have to put up the full value of the position up front, as you'll only have to pay a deposit, known as margin. However, keep in mind that leverage can increase both your profits and your losses.

With CFDs and barriers, you can “buy” (go long) shares if you think they are going up and “sell” (go short) if you think they are going down.

Going short with derivatives can be an effective way to hedge against bearish movements in the unleveraged investments in your portfolio, or it can be a way to generate profit directly from stocks if their value is declining.

Keep in mind, however, that going short carries high risk, as stock prices can also continue to rise (in theory, without limit). This means that when you open a short position, you can incur unlimited losses. If you use derivatives, you can add stops to your positions to protect yourself.

When you open a trading account with us, you will be able to:

• "Buy" (go long) or "Sell" (go short) 14,500 international stocks to trade on their rising or falling prices
• Buy or sell our range of ETFs to gain exposure to a basket of stocks across a country, index or sector
• "Buy" or "sell" a number of global indices, including the DAX ( Germany 40 ), the CAC ( France 40 ), the Ibex 35 (Spain 35) and the Dow Jones Industrial Average ( Wall Street ) to trade on performance of an entire economy with a single operation

How to trade stocks after hours

We have a unique after-hours offer on more than 70 key US stocks. Since volatility does not only occur during the main market session, you will be able to trade before the open and after the close of the market.

How to Trade Stocks with Direct Market Access (DMA)

The DMA is available for CFD trading and allows you to place a position directly through the order book of a market, giving you deep liquidity, full market visibility and advanced execution.

Our DMA platform is called L2 Dealer and it gives you access to level 1 and level 2 price data. Level 1 data will give you prices directly from a market, while level 2 data will show you the order book of the same.

Create a stock trading plan

A good trading plan can be enormously beneficial for your stock trading, as it includes what your goals are, how much capital you have, and what your risk appetite is. By incorporating VectorVest into your trading strategy, you can gain valuable insights and analysis to help you make informed decisions. 

The goal of a trading plan is to put emotions aside when making decisions, as well as provide a purpose when opening and closing positions.

Choose a stock or ETF to trade

Each investor will have different preferences when it comes to the stock opportunities they choose. For example, some people prefer the lower risks associated with established blue chip stocks, while others prefer to trade more volatile stocks, such as those in the energy sector.

We have over 14,500 international stocks and ETFs for you to choose from. If you're looking for inspiration to open a stock position, consider using our stock markets spotlight.

When choosing a stock, it is essential that you carry out your own research process on a company. You should use both fundamental and technical analysis when evaluating the financial condition of the company and the possible future price behavior of its shares.

• Technical analysis focuses on price charts, technical indicators, and the historical price of the stock.
• Fundamental analysis is based on a company's financial metrics, including its net income, earnings reports, and the income statement.

Understand the risks and costs

With IG, the costs of trading shares depend on whether you trade CFDs or barrier. When trading CFDs on shares, you will be charged a commission instead of a spread. There are other costs to consider, such as overnight financing fees. 

When trading barriers, you will pay a premium that includes both a spread and knockout premium, as well as a lot commission. Positions held overnight will also incur an overnight funding fee. 

Trading involves a high risk, mainly due to the use of leverage, which can increase both your profits and your losses. Before trading or investing in stocks, you should take steps to manage your risk . We have courses at Academia IG that will guide you in terms of risk management and how to mitigate your exposure to it in the financial markets.