Stock Trading

For all intents and purposes, stocks and shares refer to the same thing. They are a type of security defined as part ownership in a company, usually, one that is publicly listed. This gives the owner of the share an entitlement to the corporation’s earnings and assets, voting rights in major decisions about the company at the Annual General Meeting (AGM), and a dividend payment if there is one (effectively a proportion of the company’s profits). Furthermore, if the company is run profitably and successfully, the hope is that the company’s share price will rise, and the owner of the share will make a capital gain on the value of their shareholding. Stocks and shares are primarily bought and sold on Stock Exchanges.

Stocks and shares can be traded with Hantec Markets as Contracts for Difference (CFDs), and as with any trading, you’ll be looking to buy low and/or sell high.

The decision to buy or to sell can be derived from either fundamental or technical analysis and should be part of a trading strategy that you’ve already tried and tested. Opening a demo account to refine a trading plan for stock CFDs is highly recommended.

As a trader, you should have a good understanding of the influences on the market you want to trade-in. You should also build a robust trading plan and set strict risk limits. You should establish an exit stop-loss and look to constrain any losses to within predefined limits.

Bid

The rate at which you can sell a given stock or share.

Ask (or Offer)

The rate at which you can buy a given stock or share.

Spreads

The difference between the Bid and the Ask prices.

Lot

Usually contract size is based on a lot system, and for all stock CFDs 1 lot is equivalent to the value of 1 share.

Dividend

A dividend is declared when a company agrees to pay its shareholders a fixed amount for each outstanding share that they hold, typically annually.

Price-to-Earnings Ratio (PE)

A method of determining a company’s valuation based on a ratio of dividing the current market price by the EPS.

Earnings per share (EPS)

A metric that derives the monetary value of a company’s earnings per each outstanding common share.

Ex-dividend

The first day of trading after the date that a company announces paying their dividend.

Stock split

A corporate action that increases the overall number of outstanding shares by dividing each original share by some pre-defined factor.

Rights issue

An invitation to a company’s existing shareholders to purchase additional shares, based on a proportion of their current shareholding, at a special price.

Spin-off

This is the process of creating an independent company either from the division of the original company, or through the sale of existing shares or creation of new shares from an existing company.

Merger and Acquisitions

A merger occurs when two companies agree to combine to form one company. An acquisition typically involves one company purchasing a majority stake in another company which can be either a friendly or hostile arrangement.

Market Capitalisation

Is a Company’s total value as determined by the public stock markets. Commonly referred to as “market cap” it is calculated by multiplying the Total Shares Outstanding of a Company by the current share price of one share.