How to trade in Share
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.
For more info about how to trade in shares, you can discover everything you need to know in this guide.
How to trade or invest in stocks
You can speculate on the price of shares rising or falling with derivatives like CFDs. CFDs have their pros and cons, which we explain later in this guide.
Learn why people trade shares
People trade shares because, just like other financial markets, they can be an opportunity to make money. At a basic level, you can take a position on shares to get exposure to economic growth – and if the health of an economy grows, you might find that companies that are based in that economy also grow.
Company growth is correlated with share price increases, which is what people are hoping for when they buy or invest in shares. As an example, over the past 100 years, UK stocks have generated average returns of around 5% a year over and above inflation, meaning that the real value of an investment would have doubled around every 14 and a half years.
Generally speaking, investors will buy shares to:
- Make a profit from share prices rising
- Receive an income from dividends if the company pays them
- Benefit from the effects of compounding
This last point requires that a share investment be held for a long period of time, and it’s why you’ll sometimes hear the phrase ‘time in the markets is better than timing the markets’ when talking about share investments.
As an example, we can see from the graphic below that the maximum and the minimum annualised returns on the FTSE 100 consolidated around the average returns over time – smoothing out the market volatility to settle at just below 10% per year.
Traders on the other hand, might be seeking to capitalise on short-term share price gains. Rather than investing in the shares, traders speculate on the share’s value. They can speculate on it rising by going long, as well as falling by going short.
This is made possible by trading with derivatives like CFDs.
Leverage is available when you use this product, which gives you full market exposure for an initial deposit – known as margin – to open your position. But, bear in mind that leverage can increase both your profits and your losses as they’ll be based on the full exposure of the trade, not just the margin requirement needed to open it. This means that losses as well as profits could far exceed your margin.
Learn the difference between investing and trading
Investing and trading are similar terms that some people will sometimes use interchangeably – but there are important differences for you to be aware of. We’ll go through what each of these terms means in this section.
Investing in stocks
Trading stocks
Understand the risks and charges
Trading can be seen as more risky than investing, mainly due to the use of leverage. But, investing also carries risk – and there’s no guarantee that your investments would increase in value, so you could receive back less than you initially invested.
Before deciding to trade in shares, you should take steps to manage your risk. We’ve got courses at IG Academy that take you through risk management and how to mitigate your exposure to risk in the financial markets.
Trading costs
Our costs and charges for trading vary depending on the product that you use to take a position.
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