Shares are like the symbol of speculative investment. Still today, when we think about this kind of investment, we fist consider shares. All in all, the share market is the market for excellence.
This role, obviously, is fully deserved. Still today, despite the rise of Forex, the share trading is an irreplaceable source of profit. The earning opportunities are really numerous, for those who can exploit them. It is a shame that it is far less simple than what is commonly thought. Even before one commits to the shares trading, or in the trading with derivate products, it is necessary to acquire an overview.
The other conditio sine qua non is the adoption of reliable tools, which can create a potentially profitable trading environment. For example, those provided by a good broker. A broker who offers a vast range of shares and imposes convenient economic conditions. A broker as Key To Markets.
If you want to trade with shares (and not only), KeyToMarkets can contribute to your success. It is one of the few brokers that combines a the amplitude of the offer, low costs and efficient support.
The advantages of share trading
Why is the share market so much appreciated and popular? The answer lies in some of its peculiar features, which set the basis for a really profitable trading.
With the exception of cryptocurrencies (which represent a separate world), the share market is absolutely the most volatile market. Actually, this particular aspect is a stable part of the collective imagination related to the world of the share market. It is one of the rare cases in which the collective imagination and reality, go along. The shares are really volatile, and this is for a number of reasons, including the enormous interdependence with respect to all the sectors of economy and finance, and the extremely high number of investors.
The volatility, obviously, is the dynamic through which the expert investors manage to gain large profits in a very short time. However, as it can be easily understood, it is also a double-edged sword. It is possible to earn considerably as well as lose considerably. Those who can manage the volatility (difficult task but not impossible) can only be satisfied by the share market.
Great variety of titles
Another peculiar aspect consists in the extreme heterogeneousness of the share market. In simple terms, it represents all the sectors, both productive or financial. This variety is a very important tool for diversification, so much that a sufficiently experienced trader could limit just to the share market and still enjoy a sufficient degree of diversification to protect them from the market risks.
Surely, this heterogeneousness could cause disorientation. It is sufficient to pull up your socks, study and take a personalised path on the basis of your needs to transform this heterogeneousness into a resource.
Double possibility of profit
This is an “almost” exclusive particular of the share market. If heterogeneousness and volatility are elements, that to a certain extent are found also in other markets, the matter of “double possibility of profit” belongs, but for very rare exceptions, only to the share market. The reference is, obviously, to the dividends.
Those who invest in actions, especially if they do not consider derivate products, can make profits in two different ways. Firstly, they can take profit from the classic trading mechanisms, mainly buying low and selling high. However, they can also take advantage of the dividends, if they maintain the shares for a sufficient time.
The shares, despite being subject to very deep price fluctuations, are very readable. This is also a unique aspect. In fact, the share market combines high volatility with an accessible readability. The reason for this is simple: there are plenty of information and elements for a thorough analysis. The trader has at their disposal the classic technical analysis and the fundamental analysis (of context).
At the same time, however, they can also employ the information that the broadcasting companies are required to provide, practically by law. The reference is to the economic account, the income statement, the balance sheet, etc.
This, without considering the papers that conduct regular investigations on the share market. The papers, in particular, contribute to give an overview and, often, a middle long period view, especially on the most important shares.
The various kinds of shares
If you want to do trading in the share market, you need to know the main protagonists of the market and, in particular, the various kinds of shares that are exchanged on a daily basis. In the following, we propose a distinction made not based on the capitalisation, but the sector of reference. This differentiation, in fact, brings about different dynamics, especially concerning the factors that move the prices.
Obviously, they are the shares with the highest index of capitalisation. They are often at the centre of attention not only from the investors, but also the analysts, policy makers and economists. In fact, they influence and are influenced by the real and financial economy. This is the key to understand the mechanism that moves their prices.
For example, if the public finances are low, the banks will always undergo deep reductions. The reason for this is simple: many banks have custody of Government Securities, which are like the termometre of the institutional-financial solidity of a country. The main market movers of bank shares are, therefore, the news that come from the public finance.
This kind of shares are mainly emitted by the great petrol and gas companies. In general, they are appreciated for the generosity with which they release dividends.
The prices, in this case, are susceptible to all those events, news, decisions and measures that modify the energetic aspect. Therefore, they very much depend on the national policies, especially if the economies are heterodirect, and especially geopolitical events.
These, in fact, are able to heavily modify the price of the energetic goods. In general, the higher the price of energetic goods, the better the performance of this kind of shares.
These shares are emitted by the great companies involved with manufactures and industry. Their quotations depend mainly on the price of energy, according to opposite dynamics with respect to those of the “energetic” shares, ando on the real economy.
An increase in the price of petrol and gas, often causes a decrease of the quotations of the “industrial” shares. The same occurs when the real economy reveals to be less solid than expected, when the consumption is reduced, when the inflation shows hevy distortions.
Technological and pharmaceutical
These two kinds, despite being related to completely different sectors, can be considered together. The reason for this is simple: they have similar dynamics. In fact, they tend to grow, even if moderately sometimes. The technological since the evolution is included in a spreading path apparently unstoppable, yet still in an initial state. The pharmaceutical since they are connected to the satisfaction of a primary and indispensable need.
What should be highlighted here is mostly the psychologic dynamics. The investors are so much used to the growth of the quotations, that any “not completely positive” data can trigger significant reactions. It is the case of some giants of the New Economy, which despite recording excellent trimesters, are baffled due to events or dynamics that in other sectors would be considered as small details.
Tips to invest in shares
However profitable, investing in shares is not easy. It is slightly better if a few measures are taken.
Choose the broker carefully
The trader should commit to the choice of the broker regardless of the market they want to operate. Therefore, also (and especially) if he intends to operate in the share market. Particular attention should be paid to the offer of shares and the economic conditions. A broker who offers more than accessible economic conditions and a wide range of shares (and more) is KeyToMarkets. Click here open a trading account.
The share market offers the opportunity to diversify, therefore why not take it? Fully exploit the heterogeneousness of the share market, carefully choosing shares and sector, in a perspective of risk control and profit maximisation. Preliminary to this approach is obviously the study, that has to be taken seriously and last a more or less long time.
Specialise in specific sectors
If diversification is very much advisable, specialisation is too. The share market is so vast, the heterogeneousness is so predominant, that the trader cannot afford to attempt “all-inclusive” approaches. The risk is not being able to go deeper, and as a consequence touch all sectors ineffectively.
Therefore, even in a perspective of diversification, specialise in some specific sectors. In alternative, if possible, specialise on a limited range of shares. These, however, have to be carefully chosen, in order to produce a sufficiently safe trading activity which is at the same time potentially profitable.
Consider the two main kinds of factors
Finally, take in consideration the true core of the share market. The necessity to analyse each share from two main points of view: the performance of sector and the performance of the emitting company.
In fact, the quotations of each share are influenced, almost identically, both by the outside events (the behaviour of the relative sector), and by how the company behaves in the real economy. From here comes the necessity to study both the company itself, and the dynamics of the exchanges.