20 February 2025,08:38
BeginnerHow-toTrading BasicsWhat-is
20 February 2025, 08:38
There are many different types of trading, and the object being traded is referred to as an asset.
These include equities (e.g., stocks), real estate, cash, fixed income (e.g., bonds), commodities, and currencies.
Each asset class holds a cornerstone position in the world’s financial markets.
Anyone can trade these asset classes through a stock exchange or online trading platforms. One interesting asset class is equities.
Equities, also known as stocks, are a type of financial asset that represents ownership in a company through its shares.
Equities are thus a very important asset class and one of the most traded assets in the world.
Any public or private company can issue shares in the market, which the investors and traders buy for the share’s price.
The primary difference is that private companies can only issue a limited number of shares, unlike public companies, which can issue an unlimited number of shares.
The share price fluctuates based on various factors, including economic trends, the company’s internal and external affairs, and general market conditions and sentiments.
Equities can be traded on any stock exchange worldwide, as well as through online trading platforms.
Traders trade equities for long-term trades, dividends, or short-term trades.
The equity market can be highly volatile as the price of a share is dependent on many factors.
This makes equity trading a great contender for speculative trading through CFDs.
A contract for difference, or CFD, enables traders to speculate on price movements and take a profit without owning the underlying asset.
Trading in equities is highly advantageous for traders in both the long and short term, provided it is done strategically.
It allows the traders to grow their wealth over time as stocks may offer higher returns than other asset classes.
The companies that issue the shares also benefit from a soaring share price, as they utilize the capital to expand or conduct operations within the company.
Most importantly, stock markets have a significant influence on a country’s economic growth.
However, there are a few disadvantages to trading equities, with market volatility being the most significant.
There are numerous facts related to trading equities, and traders at all levels of expertise should be familiar with them.
In this article, we bring you everything you need to know about equity in the stock market, how trading in the equity market works, and much more.
In the stock market, equity represents ownership in a company. It is a financial asset heavily bought and sold in the financial market.
Financial markets comprise buyers and sellers who influence the price of an asset by trading various assets.
Many other factors initially affect the asset’s price, including global news, socio-economic developments, and corporate announcements.
A few of the most commonly traded assets include equities, real estate, currencies, bonds, and commodities.
Equities are shares representing ownership in a publicly traded company.
The real estate asset class includes holding real estate in the country or internationally.
Currency trading, also known as Forex or foreign exchange, involves traders profiting from the exchange rates of different currency pairs.
Bonds are debt securities issued by companies or governments.
Commodities are basic goods that are traded in large volumes.
Almost every asset class has some degree of volatility and risk, but they also make a profit and diversify your portfolio.
Each asset class is unique in its own way, but equities and bonds are often considered to be similar in nature. However, they are not.
Bonds are of two types: government and corporate bonds.
Corporate bonds are debt securities issued by companies to raise capital for expansion, acquisitions, and other corporate-related activities.
Investors lend money to these companies and receive periodic interest payments.
Corporate bonds do not represent any ownership in the company for the bondholder. Instead, the bond is seen as a loan only.
Unlike corporate bonds, equities represent ownership in a company, which is the main difference between the two. Investors may trade in equities for three main reasons:
Traders holding equities for the long term may see their investment receive a significant boost over time.
Traders with short-term holding of the equities profit from price changes and robust buying and selling of the asset.
Finally, companies offer long-term equity holders dividends, essentially a part of their profits.
Equity trading involves the buying and selling of shares in public companies on stock exchanges worldwide.
The most famous stock exchanges include the New York Stock Exchange (NYSE) and the London Stock Exchange (LSE).
Traders can conduct equity trading through online platforms where they must set up a brokerage account and fund it with capital.
The online platforms also operate through the exchange, which is open for a limited time each day and only 5 days a week.
Some exchange markets may also offer traders pre-market and after-hours trading opportunities, allowing them to benefit from news developments.
There are several order types that a trader can place in equity trading.
A few of them are specifically for risk mitigation and aversion.
These orders include market order, which is an order that is executed at the current market price; limit order, which is an order that is executed only at a specific price or better; stop-loss order, which is a risk mitigation technique and is an order where a sell order is triggered when the price of a stock reaches a pre-specified price; Take-profit order is also a risk mitigation technique and is a sell order which is triggered when a certain pre-specified profit value is reached; and finally, at railing stop order is a risk mitigation order which is triggered to keep profits and lower losses dynamically.
Equity trading online requires a valid brokerage account with correct details and capital.
Online platforms are ideal for this purpose because they provide access to diverse markets, stock exchanges, and technical analysis tools that help traders diversify their portfolios and make informed financial trading decisions.
MetaTrader 5, TradingView, and eToro are the most widely known trading platforms.
The equity market can be highly volatile as the price of a share is dependent on many factors.
This makes equity trading a great contender for speculative trading through CFDs.
A contract for difference, or CFD, allows the trader to speculate on price movements and take a profit without actually owning the underlying asset.
Therefore, traders hold short-term positions in equities and capitalise on price movements.
This keeps the market liquid, but it also poses risks and potential losses.
As explained, equities are a leading asset class in trading, and almost every trader aims to make a profit from them.
For beginners, we suggest practising equity trading on a demo account before they enter the real world of trading with real capital.
A demo account is an account that can be made on online trading platforms and mimics real-world situations and challenges in financial trading.
Beginners can learn and practice here and then apply their knowledge to real-world trades.
Trading equities can be smooth once you understand the process.
The following is a step-by-step guide on the process for you to follow:
The first step is to set up a trading account. Many great platforms are in the market today, but each has something unique.
Each platform has associated fees, commissions, features, and security regulations.
Conduct thorough research before selecting a platform.
After choosing a brokerage platform, set up your account and provide accurate personal information.
Once the platform has everything it needs, you will receive an email with your account confirmation and activation details.
Before jumping into trading, it is best to learn how to use the platform and its tools.
This will not only help you have a smooth trading experience but also help you make logical and profitable decisions.
Familiarize yourself with the platform’s interface and features like charting tools, technical indicators, and market data feeds.
Most platforms also offer demo accounts, allowing you to simulate trading without using or risking real money.
After thorough research, select a company that aligns with your trading goals, interests, and risk tolerance.
Try to understand the driving factors behind these markets and their prices.
Select a few companies at the outset and maintain a focused research approach.
This will help you make an informed choice.
A trading plan is one of the most crucial steps in trading.
Begin by outlining your goals for the trade and your risk tolerance, and consider your preferred trading style.
Your trading plan and style will be refined over time, but it is important to learn from your mistakes and continue learning and researching.
Focus on your strengths and develop a well-defined strategy that will help you stay disciplined.
Once you feel comfortable with your knowledge of the selected company and the platform, execute your first trade.
Deploy risk mitigation strategies to minimise loss and monitor your trade closely.
Utilize stop-loss orders, position sizing, and portfolio diversification to mitigate risks and avoid mishaps.
Equity markets have come a long way since the emergence of online trading platforms.
These platforms offer various technical tools that can be used to the trader’s advantage.
Here we mention a few of the most famous market tools:
Price charts portray the asset’s price movements over time and are one of the most important tools in any trade.
Many different analyses can be performed on a price chart, but one of the most useful is drawing and anticipating trading patterns that hint at possible trend reversals.
Order books are a real-time list of all buy and sell orders placed within a specified time period.
They provide traders with important information on supply and demand, market liquidity, and support and resistance levels.
Technical indicators are particularly useful for equity markets, as they provide mathematical insights into trade and pattern developments.
The relative strength index (RSI) measures overbought or oversold assets.
RSI measures this momentum on a scale of 0 to 100.
If the RSI value is below 30, the general sentiment is that the asset is oversold, whereas if the RSI is above 70, the asset is overbought.
Using these metrics, traders can potentially place their entry or exit points in a trade.
Moving averages over a period of time show the overall market direction.
These work well when the duration exceeds 50 days, as they are primarily used to identify long-term trends.
MACD, or Moving Average Convergence/Divergence, explains the overall market trend and momentum strength.
If the MACD line crosses above the signal line, the signal is considered bullish, but if the MACD line crosses below the signal line, the signal is considered bearish.
This is one of the most essential tools you can use to monitor price changes and identify the factors that affect these changes.
You can use the in-built news feed on your trading platform or can access generally available news from TV, online applications, and more.
Equities and shares are terms used interchangeably to describe one’s stake in a company, but in the financial world, these are two distinct terms with key differences.
As explained, equities are a type of financial asset representing company shares.
It is a broader term that covers the ownership of a public or private company.
On the other hand, shares are individual ownership units in a company.
The term “equity” is primarily used to describe market trends and investment portfolios of individuals and companies.
In contrast, the word share describes a single unit of a company owned by an individual. This is a subtle but key difference between the two.
Furthermore, equity is also used to describe stakes in mutual funds, ETFs, and other investments, whereas shares are primarily used to refer to company stocks.
Here are the key differences between equities and stocks in a tabular form:
| Characteristics | Equities | Shares |
| Meaning | Describe ownership in a company | Describee individual units of ownership in a company |
| Scope | A broad term | A specific number |
| Ownership | Overall ownership | Fractional ownership |
| Types | Mutual funds, ETFs, and company stock | Company stock |
There are several types of risks and considerations associated with trading equities, which we outline here.
This is the most significant risk associated with trading equities.
The price of the shares depends on several factors, making the market highly volatile.
Any changes in the government, the economic market, or the company can have a significant impact on the price of the share.
Which means that your investment is always exposed to some level of risk.
Leverage is a trading strategy that enables traders to hold a large position with a relatively small investment.
This raises the profit margins but also increases the loss margins drastically.
Traders dealing with leveraged trades should make very calculated decisions.
Governments and companies can change policies at any time.
This may affect your position in the long or short term.
The main difference between equities and shares is that equities are a broad term used to define ownership in the company.
In contrast, shares represent individual units of ownership in the company.
They are, therefore, highly used interchangeably.
It is essential to understand their individual meanings, as they are used variably in different conversations.
You can start trading equities by simply making an online brokerage account on a trading platform of your choice.
The account will require your details and a capital contribution.
After funding the account, choose a company and set up your trade.
Execute your order and monitor it closely.
Use technical analysis tools provided by the platform to adjust your trade accordingly and keep yourself updated with the latest news developments that may affect the company you hold equity in.
There are several tools available for both technical and fundamental analysis.
These tools include price charts, order books, technical analysis, and economic and market news.
Equity trading involves the buying and selling of shares in public companies on stock exchanges worldwide.
The most famous stock exchanges include the New York Stock Exchange (NYSE) and the London Stock Exchange (LSE).
Traders can conduct equity trading through online platforms where they must set up a brokerage account and fund it with capital.
The online platforms also operate through the exchange, which is open for a limited time each day and only 5 days a week.
The equity market can be highly volatile as the price of a share is dependent on many factors.
This makes equity trading a great contender for speculative trading through CFDs.
A contract for difference, or CFD, allows the trader to speculate on price movements and take a profit without actually owning the underlying asset.
For beginners, we suggest practising equity trading on a demo account before they enter the real world of trading with real capital.
Beginners can learn and practice here and then apply their knowledge to real-world trades.
Step into the world of trading with confidence today. Open a free PU Prime live CFD trading account now to experience real-time market action, or refine your strategies risk-free with our demo account.
This content is for educational and informational purposes only and should not be considered investment advice, a personal recommendation, or an offer to buy or sell any financial instruments.
This material has been prepared without considering any individual investment objectives, financial situations. Any references to past performance of a financial instrument, index, or investment product are not indicative of future results.
PU Prime makes no representation as to the accuracy or completeness of this content and accepts no liability for any loss or damage arising from reliance on the information provided. Trading involves risk, and you should carefully consider your investment objectives and risk tolerance before making any trading decisions. Never invest more than you can afford to lose.
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