Share Trading for Neophytes - by Ron Wilson

Wednesday, 7 September 2016
Trading shares is one of the most effective means to develop a sustainable source of income over time. Millions of individuals from all walks of life take part in this massive industry every day. However, there is a considerable learning curve involved and those who hope to enjoy success should first appreciate some of the most basic principles. Let's break share trading down into its core essentials to understand the underlying mechanics.

The Universal Principle
The first thing to mention is that buying and selling shares involves the trader anticipating a certain price movement within a specific period of time. This is the primary method to accrue profits. In the majority of cases, an investor will purchase shares (such as holdings in Microsoft) under the pretence that the underlying values will rise. When he or she reaches a target margin, these shares will be sold and a profit is then realised. Many will now utilise the power of electronic share trading platforms to enjoy a greater variety of assets.

The Different Types of Trades
Of course, there is much more involved than simply predicting the price of a holding. It is just as important to realise that there are a number of different trading methods to choose from. These can be based on the personal preferences of the investor, as well as other factors such as short-term goals or an aversion to open-market risks. Some variants include:

• Binary options
• Mutual funds
• Exchange Traded Funds (ETFs)
• Listed Investment Products (LIPs)

Each of these methods offers its own unique benefits. Before venturing into the world of stock trading, it is a good idea to become familiarised with the main types.

The Question of Commitment
In this sense, we are referring to the financial commitment that the trader can make at any given time. Some will naturally have higher limits than others and this is a very personal decision. Regardless of one's fiscal capacity, it is important to NEVER become greedy and allocate more than the initial amount. Greed has been the downfall of many novice traders. It is best to stay within comfortable margins and to appreciate the fact that what goes up, can and will come down.

Share Trading Strategies
Some investors may prefer to focus upon short-term goals. Day traders will often fall into this category. Others could instead be looking to add to an existing pension plan or to use profits to pay off an existing mortgage. These situations tend to embrace long-term trading methods. One can be keen to leverage open-market risks while another will only adopt a conservative approach. Regardless of these discrete requirements, modern trading software is able to accommodate nearly any desire. This sense of flexibility will also help to hone strategies and approaches over time; an enviable benefit in today's fast-paced world.

Share trading is just as much of an art as it is a science. What could work well for one individual may be irrelevant to another. This is why understanding the basic concepts is so very important.

Ron is a blogger and journalist who has been writing about forex and trading since 1999. Before transitioning to journalism, Ron worked in the city of London as a analyst for some of the worlds biggest trading companies. He now enjoys a more relaxed pace of life and enjoys taking time at the weekend to play golf or spend time with his kids.