What is Share Trading?

Submitted by Marco on 2 May, 2006 - 13:29

Marco tries to answer the simple question: "What is Share Trading?"

What is share trading? Of course you may say - the answer is simple: "Share trading is the activity of actively trading shares in the view of making a profit". Simple wasn't it? Well, case closed, we can all go home now. Well, I want to probe into what share trading really is in reality, not some non-sensical theory that seems impractical in the real world. Sure, the laws of supply and demand rule the markets, but what I want to discuss is what share trading means to the retail trader: traders like you and me.

If you have found this blog, it is because you are:
(i) already trading shares for a living and already are successful, and just sitting in front of your computer, just waiting for your stocks to hit their target price for you to either exit to enter into the market;
(ii) already trading shares but looking for "better ways" to trade;
(iii) just looking into share trading;
(iv) Just a lurker that reads random blogs.

I'm generally writing for (i), (ii) and (iii). Share trading to me is this: it allows me to make money so I can go do other things that I want to do. It gives me freedom. Now, share trading takes many forms and means many things to people. It may be a hobby, it may allow them to make the extra cash to take that yearly holiday. But one thing is for sure: everyone is in it to make money. Besides our goals, the only other real difference between traders is the methods by which we conduct our share trading to make that profit. This discussion does not include "investing in shares." Ask me anything about managed funds or investing - I wouldn't know anything about it. (Although I plan to in future).

Share traders have a choice in the tools they use in trading. Each financial tool has a different set of advantages and disadvantages. Each tool has a certain use in each traders share trading strategy. It is up to the trader to educate themselves to know how to use these tools effectively. Now, what are these tools am I talking about? Well, I'm talking about the different financial instruments out there: stocks, bonds, futures, options, CFDs, warrants and cash deposits. It is up to each trader's style and risk adversity to choose which instruments they utilise in share trading. This is where it pays to know what strategy to use and why. This is where application of your knowledge is vital to your trading success.

I brought up a few new concepts about share trading in this entry which I will discuss in future blog entries: trading styles, educating yourself and strategies to use in share trading.