The buying and selling of company stocks or shares is referred to as share trading. So, you become a shareholder when you buy shares from a company. That is because you are purchasing a portion of ownership from that company. Many traders aim to buy low and sell high in order to make profit. On the other hand, many would want to earn dividends. This is what shareholders receive from profitable companies by way of periodic payments.

Different Approaches to Share Trading

There are normally two approaches to trading shares, namely short-term trading and long-term investing. If you consider the short-term trading, you have to buy or sell shares frequently. This is often a day trading transaction that is often done in a single day or over a few weeks. However, if you choose long-term investing, you have to buy shares with the intent of holding onto them for several years so that the value will grow over time.

How Share Trading Works for Everyone

Share trading basically works by connecting buyers and sellers through a stock exchange platform.  Here is the process flow when you are thinking of engaging in a share trading business.

First thing that you are going to do is to open a trading account. A broker or share trading platform will sign you up and give you access to the stock exchange. The traders will research companies, industry trends, and the economy to determine which shares they are going to sell or buy. Some platforms even offer analysis tools to help you out. 

You may also buy shares after getting confident with the stocks you have studied. Basically, you can do this from a share trading platform of your choice. This can either be a market order for the current price and a limit order for the specific price.

You can also decide whether to hold or sell a share, depending on your preference. Holding onto shares will enable you to grow their value or earn dividends. Then, when you are ready, you can sell the shares so that you can capture profits or cut losses. The profit and loss margin is also pretty basic, wherein you sell for more than what you paid for. So, when the stock rises after making a purchase, you can make a profit. Otherwise, you could incur a loss if it drops.

Researching Stocks Before Buying

You have to analyse both the company and the market environment if you are aiming to make investments in trading. That said, you need to understand what business the company is offering. This will enable you to determine if this is a growing sector or if the company is a leader in its field.

Try to analyse the key financial statements to learn more about what is going on. The key metrics can also help in determining how well the company is doing compared to its competitors. Moreover, you need to investigate the revenue trends, profit margins, and market share. This is because the company with steady growth often has higher potential for appreciation of their share price.