Share Trading

What is share trading?

Share trading entails purchasing and selling company shares to profit from price fluctuations daily. Share traders differ from regular stock market investors because they use a short-term approach rather than a long-term one.

Why should I trade shares?

Shares can be an excellent addition to any financial portfolio. Investing in various companies’ shares can help you develop your savings, safeguard your money from inflation and taxes, and maximise your investment income.

Why do companies issue shares?

Companies issue shares to pay off debt, introduce new products, add new markets or areas to their business, increase the size of existing facilities, or construct new ones.

What are the types of shares available?

  • Common share

    If you are new to share trading and want to acquire a few shares, you will probably want to buy a common share which is exactly what its name implies: the most common sort of share. You hold a percentage of the company’s profits and the opportunity to vote if you own a common share. Dividends are payments provided to stockholders regularly and available to common stockholders, but they are often variable and not guaranteed.

  • Preferred share

    Preferred share differs from the common share in that it gives preferred shareholders priority over common shareholders in receiving a specified amount of money if the company dissolves. Preferred shareholders are also entitled to dividend distributions ahead of regular shareholders. As a result, preferred share frequently mimics fixed-income bond investments more accurately than standard common share as an asset.

What are the types of shares trading?

There are 5 types of share trading:

  • Day

    On a daily basis, day traders strive to go in and out of stock market positions. At the end of each trading day, they normally sell out all of their portfolio positions.

  • Scalp

    Scalping is also known as micro-trading. Scalping and day-trading are subgroups of intraday trading. Scalping entails consistently earning tiny profits, spanning from a dozen to a hundred in a single market day.

  • Swing

    Before selling, a swing trader keeps a trading position for days or even weeks.

  • Momentum

    In momentum trading, a trader takes advantage of a share’s momentum, such as significant price movement, either upwards or downwards. A trader seeks to profit from this momentum by selecting equities that are breaking out or are about to break out.

  • Position

    A position trader is more likely than any other trader to venture into long-term investment terrain. A position trader will typically keep a share position for months, if not years.

Is share trading risky?

Yes, share trading is risky because:

  • Returns are not certain

    While equities have traditionally outperformed the market over time, there is no assurance you will make money from share trading at any given time. Although various factors can aid in evaluating a company, no one can anticipate how a share will perform in the future. There is no certainty that the company will pay dividends or that prices will rise. Or that a company will even continue to exist.

  • You could lose money

    Share values frequently fluctuate for various reasons. When you purchase and sell shares, you must be willing to risk losing all of your money, especially if you are not going to invest for the long term. You risk losing more money than you trade if you utilise leverage to invest in shares, such as buying on margin or short selling.

Is share trading suitable for the long-term or short-term?

  • You should choose long term investment if you are planning to build wealth and enjoy it before you retire. Long-term investments may also be preferable if you want to beat inflation or be protected from it. Long-term investments, such as shares, are frequently regarded as less safe than other assets. Still, they offer a higher potential rate of return over time, giving you a better chance of preserving your purchasing power.
  • You should choose a short-term investment if you need the money in a shorter time frame to make a down payment on a house or buy a car. You can also prefer short term investment if you want a regular source of income to support yourself and your family.

Is share trading suitable for emergency funds?

Because equities are volatile, most financial gurus do not recommend putting your emergency money in the stock market. It would be a shame to have to sell an asset at a loss to access your emergency money.

What affects share trading?

  • Economy

    Interest rates, inflation, unemployment, and economic growth are all factors that affect the stock market.

  • Natural disasters

    For example, if an earthquake strikes a busy city with much economic activity, markets will fall as investors fear a negative impact on the economy.

  • Politics

    If the political situation is bleak, with the government appearing weak, the threat of war looming, or if the public opinion of the current administration is negative, share prices will fall. Similarly, the stock market will do well if the government looks robust and has widespread popular support.

Who is eligible to trade shares?

You can start trading if you are above 18 years old.

Does share trading generate interest?

Yes, share trading generates interest.

What are the common fees for share trading?

You can find out here.

How to choose the best share trading provider?

To make your life easier, we have listed some of the best stock brokers in Malaysia below:

  • Apex
  • Affin Hwang
  • Alliance Bank
  • CIMB
  • Hong Leong Bank
  • Kenanga
  • Mercury Securities
  • Public Bank
  • Rakuten Trade
  • RHB Invest

What are the common terms for share trading?

  • “Bid-Ask spread”

    The gap between the highest and lowest price at which someone is ready to buy or sell shares.

  • “Bull market”

    A market environment in which share prices keep rising.

  • “Bear market”

    A market environment where prices are constantly falling.

  • “Market order”

    This order instructs the buyer or seller to buy or sell as soon as possible at the best price currently available.

  • “Day order”

    If this order is not filled during the day, it will be automatically cancelled at the end of the trading day.

  • “Volatility”

    The statistical measure of a share’s upward or downward movement.

  • “Liquidity”

    The ease with which a share can be bought and sold.

  • “Trading volume”

    The total number of shares traded at any one time.

  • “Going long”

    Buying shares to benefit from a rise in the share price.

  • “Going short”

    When a trader tries to profit from the price of a share falling.

  • “Averaging down”

    As a share price falls, a trader buys additional shares, lowering the average price paid for the position.

  • “Market capitalisation”

    The total worth of all a company’s shares. Also known as market cap.

  • “IPO”

    The initial public offering. It is when a corporation sells shares for the first time on the stock exchange.

  • “Secondary offering”

    Even after its shares have been sold on a stock exchange; a firm might raise money by selling shares.

  • “Dividend”

    When a firm delivers a percentage of its profits to its shareholders. Typically the focus of long-term investors and retirees.