What are shares?

When you hear people speak about trading or investing, most likely they'll be talking about share trading. It's one of the most popular - and most traditional - ways to trade the financial markets. Particularly among individual investors.

As we saw in the previous lesson, if you've got a pension plan, the chances are you're already investing in shares in some capacity. But what are shares? And how do they work?

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Since no human can see into the future, unfortunately new and experienced traders alike will sometimes have to contend with losing trades.

Emotions can run high at these times. Watching your hard-earned money being depleted from your account is an uncomfortable experience - and it can compromise your decision-making abilities.

That's why it's important to decide - right at the outset - where you'll get out if this trade doesn't go well.

Rule 1: Always have an exit…

If you've ever gone on holiday and exchanged say, pounds for euros, then you've participated in the forex market. Simply put: Forex is how individuals and businesses convert one currency to another.

Forex



Forex, also known as foreign exchange, FX or the currency market, is the largest financial market in the world. On average over $5 trillion worth of transactions take place every day. That's around 100 times more than the New York Stock Exchange (NYSE) - the world's biggest…

What is a 'pip'?

Unlike share price movements, which are measured in recognisable units of currency such as pence or cents, forex changes are measured in very small units called pips.

For example, if the EUR/USD price moves from 1.20160 to 1.20170, that 0.0001 USD rise in value represents one pip.

EUR/USD

For most major currency pairs, a pip represents a one-digit move in the fourth decimal place.

One important exception to this is where the yen is the…