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…

Financial markets are full of surprises, letting some get enormously rich while others (who are in majority unfortunately) lose all their capitals. But being patient and striving to perfect their skills many of those who lost in the very beginning still have their chance to become lucky millionaires someday.

On the other hand those who got rich in the beginning thus becoming all too confident and stubbornly righteous may someday turn into complete failures complaining about the…

Most major shares are traded on the stock market. This is a general term for a global network of specific exchanges where shares are bought and sold.

For example, the majority of UK shares are traded on the London Stock Exchange (LSE), while most US shares can be found on the New York Stock Exchange (NYSE) or NASDAQ.

These exchanges are highly-regulated marketplaces where buyers and sellers come together to negotiate the transaction of shares. Only certain qualified individuals…