Shares trading definition

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Shares trading is the buying and selling of company stock – or derivative products based on company stock – in the hope of making a profit.

Shares represent a portion of the ownership of a public company, and make up its worth or market cap. The trading of shares is one of the most popular and best-known markets in investing, alongside forex and commodities.

There are two main methods of profiting from the price movements of shares: non-leveraged trading (share dealing), and leveraged trading.

Non-leveraged

Most shares trading takes place on stock exchanges, where public companies are listed. Only registered participants are allowed to trade directly with stock exchanges, so the majority of traders will do so via a stockbroker.

Leveraged

As well as trading on exchanges, it is possible to use derivative products like CFDs to participate in the shares market. These allow for more flexibility than traditional trades, with the opportunity to take long or short positions to trade in both bull and bear markets.

These products operate on leverage, to increase exposure on a position without the use of more capital. However, this means CFDs also carry greater risks: including the risk that your losses could exceed your deposits.

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