Stocks Trading

What Are Stocks?

Stocks—also known as equities or shares—are issued by public corporations as a way to raise capital and fuel business growth. The first sale of shares is called an Initial Public Offering (IPO). After the IPO, shares are traded on the stock market.

Owning shares does not mean owning physical assets of a company. Corporations are treated as separate legal entities, meaning they own their assets independently from shareholders. This is known as the separation of ownership and control.

This separation limits liability for both parties. Shareholders are not personally responsible for corporate debt, and corporate bankruptcy does not endanger personal assets of shareholders.

At the core of a stock’s value is the shareholder’s entitlement to a portion of the company’s profits.

How Do I Trade Stocks?

Stocks are traded on stock markets, where buyers and sellers agree on prices. Traditionally, this occurred on physical trading floors such as the London Stock Exchange (LSE).

Today, most stock trading occurs electronically through virtual exchanges powered by advanced computer networks.

Shares can only be traded after a company’s IPO, making the stock market a secondary market. Investors buy shares from other shareholders—not directly from the company.

Traders invest in stocks because company valuations fluctuate over time. Profits or losses depend on how accurately a trader anticipates market movements.

While short-term price prediction is difficult, stocks generally appreciate in value over the long term. Many investors therefore hold diversified portfolios and benefit from dividends paid by larger companies.

Stock trades occur for many reasons—profit-taking, loss reduction, or changes in market outlook—all driven by differing trader strategies and timelines.

Stock Trading Risk Assessment

All financial investments carry risk, and stock trading is no exception. Even experienced traders cannot predict price movements with complete accuracy.

While various strategies exist, no strategy is entirely risk free. Proper risk management—including limiting capital per trade—is essential for long-term success.