How to trade shares

The stock market is full of opportunities for every trader, with over 13,000 shares and ETFs to choose from with IG. Whatever your level of expertise, follow this step-by-step guide to start trading shares.

Call +61 3 9860 1799 or email helpdesk.en@ig.com to talk about opening a trading account. We’re here 24 hours a day, from 8am Saturday to 10pm Friday (UK time).

Contact us: +61 3 9860 1799

If you’re ready to open a position on a share, here are three steps to follow:

1. Decide which stock to trade in

You can trade via leveraged products such as Contract for Differences (CFDs).

2. Decide whether you want to go "long" or "short"

You can use our market screener tool to choose from over 13,000 CFD markets on international stocks and ETFs.

3. Open a live share trading account with IG

Fill in our simple application form and create a CFD trading account to start trading in minutes.

Learn how the stock market works

The stock market works much in the same way as an auction – buyers and sellers negotiate a price that they are both comfortable exchanging for an asset, in this case shares of companies.

Companies that wish to raise capital will list their shares through the process known as an initial public offering (IPO). Once their stock is public, individual investors and institutions can start to trade the shares.

Individuals who believe that a company will see strong growth will buy the shares, hopefully for a low price so that they can make a profit when they sell it at a later date. While individuals who believe a company will face trouble would sell the shares, aiming to make as much as possible for their shares so that they turn a profit or cut a loss.

You have to be registered to trade directly on an exchange, so most people will go through a stockbroker. In the case of leveraged trading, your provider will take the place of a broker – opening and closing positions based on your instructions. Today, the majority of retail stock trading takes place via an online trading platform.

What moves the price of shares?

Initially, a company will set a price at which it will list on a stock exchange – known as its IPO price. After that, fluctuations in the share price are caused by changes in the supply of and demand for the stock.

There is always a limited supply of a company’s stock. A company can make the decision to issue more shares, or buy back shares from investors to reduce supply, but the number of shares in circulation is always known.

If there are more buyers than sellers on the market, then demand grows and the share price will rise. However if there are more sellers on the market, indicating a fall in demand, then the share price will decline.

There are a number of reasons that the demand for a share can fluctuate over time, including:

  • Earnings reports. Companies usually release interim reports on their financial performance once every quarter and a full report once a year. These influence the company’s share price as traders and investors use figures including revenue, profit and earnings per share (EPS) as part of their fundamental analysis
  • Macroeconomic data. The state of the economy a company operates in will affect its growth. Data releases such as gross domestic product (GDP) and retail sales can have a significant influence on company share prices – strong data can cause them to rise, while weak data can cause them to fall
  • Interest rates. If rates are high, individuals won’t need to take big risks to get healthy returns and can save instead, which may cause the stock market to see less investment. So if it looks like a central bank is likely to raise interest rates, demand for shares may fall
  • Market sentiment. Share price movements aren’t always based on fundamental analysis. The view that the public, as well as market participants, have on a particular stock can also cause demand to fluctuate. This is how speculative bubbles are formed

Know the difference between buying and trading stocks

Before you can take a position on a share, it is important to understand the difference between how to buy a share, and how to trade on its price movements. The main differences between these two methods are the timeframe that the positions are held over, and the means of making a profit.

Investing

Investors buy shares outright in the hope that they will increase in price and can be sold at a later date for a profit. They uphold the traditional mantra of buying low and selling high – known as going long. Investors will take positions over a longer period of time, attempting to profit from share price changes as well as dividend payments.

Trading

Traders use derivative products that take their value from the price of the underlying market. These do not require traders to own the shares so, while traders will not have shareholder rights or receive dividends, they can take a position to profit from both falling and rising prices. Traders will tend to hold positions over the short to medium term and focus on smaller market movements.

You can trade shares with IG by:

  • CFD trading. This method has many of benefits – including out-of-hours markets, and the ability to go both long and short.

A good trading plan can be hugely beneficial to your stock trading, as it will outline exactly what your aims are, how much capital you have at your disposal and what your appetite for risk is.

The aim of a trading plan is to take the emotion out of your decision-making, as well as providing some structure for when you open and close your positions.

When you trade in CFDs, your risk is associated with the leverage on your trade. Trading on a leverage is a feature which enables traders to open a position for just a fraction of the initial outlay required of investors. While leverage magnifies your profits, it could also magnify your losses.

There are tools that traders can use to manage this risk, such as stop-losses that enable them to define their exit point for trades that move against them. Normal and trailing stops can be impacted by slippage, which is when market volatility causes a disparity between the price you have requested and the price your provider can execute the trade at. However, you can protect yourself against slippage by attaching a guaranteed stop-loss. Unlike other providers, IG doesn’t charge you anything upfront to use a guaranteed stop, but there would be a small premium to pay if it is triggered.

With IG, you’ll also have a negative balance protection. So, if a position closes and leaves you with a negative cash balance on your account, we’ll bring it back to zero at no cost to you.1

For example, let’s say you want to buy 1000 shares of a company at a share price of 100p. To open a conventional trade with a stockbroker, you would be required to pay £1000 (ignoring any commission or other charges). If you had opened your trade with a leveraged provider instead, you might only be required to put down a margin requirement of 20% on the same shares – this would give you a $1000 exposure, with just $200 needed to open the position.

When you use CFDs to trade shares, you’ll be charged the commission.

Creating a live trading account with IG is a straightforward process. You could be ready to open your first position in minutes with these simple steps:

Fill in our simple online form

We’ll ask a few questions about your trading experience.

Instant online verification

We can usually verify your identity immediately.

Choose which market to trade

Decide which of the 17,000 markets you can trade CFD on.

Fund your account and trade

Withdraw money easily, whenever you like.

If you don’t feel confident enough to start trading on live markets, you might want to consider opening a demo CFD trading account. An IG demo account comes preloaded with $20,000 virtual funds, which can be used to practise trading thousands of shares CFD. Once you’re happy that your strategy would work on live markets, you can open a live account.

IG offers a wide range of trading tools that will enable you to identify your first opportunity, including our:

  • Stock market screener. Filter shares by country, sector or index – and sort by EPS, market cap and more
  • Technical analysis tools. Use our powerful HTML5 charts that include indicators such as Bollinger bands, RSI and moving averages
  • News and trade ideas. Find information on stocks to watch and market opportunities from our team of expert analysts and in-house financial writers
  • Trading alerts. Set notifications for when a share price reaches a certain level or moves by a certain amount

Once you have chosen a stock to focus on, you can open your first position.

If you want to start trading, the first thing to decide is whether you’ll ‘buy’ the market to open a long position, or ‘sell’ to open a short one. When you open a trade, you can also attach orders to your position. This includes stop orders – which automatically close your trade if the market moves against you by a predetermined amount – and limit orders, which would close your position when the market moves in your favour.

You’ll be able to monitor your open positions on your workspace. Any running profit or loss will move in line with the underlying share prices. Once you are ready to close your trade, you can do so by clicking on the open position.

When you trade, you’ll just need to select the ‘close’ button. Your final profit or loss would be realised upon the closing of the trade.

You can also close your trading positions manually by taking the opposite position from your initial trade (unless you force open the new position).

FAQs

You can make profit share trading by correctly predicting whether a company’s stock will rise or fall in value.

If you are trading shares with derivative products, you could take advantage of falling market prices by going short.

You can trade shares online via the IG trading platform, which offers you a fast and smart way to trade via your web browser. You will have full dealing functionality and be able to open, close and edit positions with just a few clicks.

Learn more about the IG online trading platform.

Beginners can start trading in stocks by learning as much as possible about the market before they open a position. One way to do this is to take a look at IG Academy’s range of online courses.

Another way for beginners to gain confidence trading stocks is by opening an IG demo account. They can build their strategy in a risk-free environment by practising trading with $20,000 in virtual funds.

  1. Decide whether to trade or invest
  2. Create a live account
  3. Choose which stock to focus on and perform analysis
  4. Open your position

If you trade CFDs on shares, you’ll be charged a commission instead of a spread. There are other charges to consider, such as overnight funding.

Learn more about our costs and charges.

Develop your knowledge of financial markets

Find out more about a range of markets and test yourself with IG Academy’s online courses.

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1Negative balance protection applies to trading-related debt only and is not available to professional traders