What are shares, and how does trading shares work?

Category: share-faq

When a company wants to raise capital, usually to take its operations to the next level, its directors may opt to “go public,” which is also known as holding an IPO, or initial public offering. This involves selling shares in the company to public investors. Once these shares are floated on public stock markets, they are available for all registered traders to buy and sell.  

A stock, or a share, is essentially just a small fraction of a company. So, if a company only issues 100 shares and you purchase ten of them, then you own 10% of the company. This is a simplified example.

Now, depending on the stock in question, holding shares can entitle holders to a dividend payment, as well as a voting say in board meetings (proportional to the amount of stock that is owned). Most traders, however, are more interested in trading the price swings rather than holding for long periods. 

The stock market is enormously important to the countries’ economies all around the world and has been massively influential in the development of trading itself. Contrary to popular belief, much of technical analysis, which is the study of chart patterns and how market cycles and trader sentiment are reflected in chart price action, was pioneered by stock traders.