Trading with Shares on the Stock Exchange

So called Online trading of financial instruments experiences very intensive development recently. Interested ones, speculating traders can set their trading orders on individual exchanges directly from their PC, online via internet and thus can immediately participate in this exciting business. CFDs and Forex contract trading is getting more and more popular. Within that can traders very quickly, easily and effectively enter the trading speculations on chosen assets on CFDs and Forex electronical exchange and can also realize their trading speculations with the use of Leverage principles and sophisticated instruments for managing the trades and financial risks.

How does it work

As a car needs engine for its movement (if it does not go downhill...), even Your trading needs a mechanism for realization of Your profit (or losses, always try to prevent it...). Trading itself is done by enering the trading positions that helps you to control certain amount of contract of chosen asset for a certaion part of money. So how are the profits and losses realized? We said that the markets are constantly moving and price are changing. The principle is the same as in any business. I.e. You want to buy cheaply and sell for higher price. And thanks to that gain your profit. It is not always possible, market or possibly price can turn against You. Then there are two possibilities. Hope that the price will turn into desired direction (which could happen, especially if you have your position opened in the direction of current price trend of chosen asset) or to prevent losses and get off the position in time, i.e. to sell bought contract immediately for either actual price or defined price, that you can specify by trading order, that will be actived when the price reaches specified value. The aim of Your trading is to expertly estimate the price movement (there are only two possibilities, prices can only rise or fall), realize bigger profits than losses, which is a matter of money management and Your knowledge about the market functioning.

This trading enables one major advantage. You can equally benefit from the rise as well as from decline of share, indices, commodities and currency prices! Therefore you do not mind, what condition are the markets in, if prices rice or decline. Only in this business, you can first sell your contracts and then buy them. This is a business invention, which can be realized in this form only within these markets! You choose your strategy, if to participate in trades by buying or selling, according to current price development of monitored commodities.

Prices of all assets (shares, commodities or currency pairs) fluctuate all the time. You can see this fact on price charts. This fluctuation (constant creating of new price levels, quotation) is obvious from short-term, middle-term and long-term charts. At a first look, these charts may seem chaotic and disorganized. But if you study closer, you discover that price developments of individual assets involve certain obvious rules. Current price developments, dependeing on supply and demand of buyers and sellersis dependend on numerous fundamental and technical factors. Fundamental factors are real news, events and various factors have an effect on current supply and demand. They determine current price of commodities. A mixture of different influences, mixture of positive and negative news, can reflect into it. Prices, that can be monitored on exchanges, in news an on your screens have all the fundamental factors calculated in their price!

Technical factors are the barriers, crowd psychology, courage of speculators, moods and other indicators, which relfect into price. Shares can be a good example. Even though the economics, inflation, GDP growth, unemployment and similar fundamental influences are stabel in longer term, share prices can fluctuate of tens or hundreds of percent in the same period, even though it is clear, that values of those companies can not change with the same percentage! Prices are moved by speculating investors, who manipulate with prices usually within certain technical levels, but they usually do not have a courage to cross them. From the charts and price development we can later see, that prices fluctuate in trends, i.e. prices develop gradually up and down and create the bottoms, short-term trends are created in the long-term, corrections and different interesting formations, which are popular among speculating traders. Even though the shares, indices and other commodities and currencies are different, they have one in common. The prices are everywhere moving in both directions, often in technically very predictable way, and all charts create often very similar formations. We say, that price trend, stagnate, face the barriers. These barriers can be either psychological (round prices, round numbers) or formed by the will of both sides, i.e. buyers and sellers, to accepts particular price levels or barriers.

Driving force for Your business is therefore to move in price movements and trends of Your chosen accets, buy and sell, i.e. enter the Long and Short positions, identify trends, barriers, monitor the market development, define the right time to enter and exit the markets. Every engine needs its fuel and lubrication. Here it means using the trading on Margin and Leverage, which is the specialty of trading with financial instruments.
Trends. If the prices move into certain direction for soma time, it is called a trend. Trend may have any of these three directions:

• Up


• Down


• Sideway

Within the trend, prices can fluctuate up or down around the trend, but you can still see the price direction of the trend. Price are moving in both directions around the trend (vertical price movements). Sometimes we can see the trend of chosen assets in the charts clearly, sometimes it is not that obvious, especially concerning the short-term trends lasting for several days. You can see the trend on chosen charts every day. You may often think, that asset price will rise or fall apparently from the chart. You do not need to be expert, because when we speak generally, you can say, if the price is moving up, down or sideway and in what timeframe -; days, weeks, months.

Another definition when looking at the chart is, what kind of trend are you looking at, if any. There are three types of trends:
a) Short-term ... (days)
b) Middle-term ... (weeks)
c) Long-term ... (months)

The significance of each trend is subjectove, but longer the trend is, more important it is. Everything depends on trader"s interpretation and his (her) own strategy. Prices do not remain permanently along the trend and they can change its overall direction anytime. If that happens, the trend is so called broken and can start another trend in different direction. But it can be just a correction, which is not a change of trend. It is a temporary move into opposite direction and it is considered only for the time, when some traders take a profit of it or for any other reason. Then, after the correction, prices move back and continue along the original trend. Even the short-term trends can change, while medium and long-term remain the same. Later may a short-term trend go into the same direction as the others, that is often a great opportunity for a trade!

Many traders like to confirm the trend before they decide. That means, that they waite for more prices for several days or weeks before they do something. A fortune has been made in both directions -; either by following the trend or going against it. The secret is a right timing -; when to do what -; even though most traders prefer to follow the trend. It is usually safer. But there is a simple rule about following or not-following the trend: it is just better not to fight with it... according to rule, you should go with the flow, trend is your friend.

Many traders use the principles of Fundamental or Technical analysis for their trading or many other sources and information. It all depends on individual appraisal and experience of Online trader. Principles of CFDs and Forex Online trading via Internet are simple. It is neccessary to learn to understand individual financial markets, work with a disposable risk capital on principles of profitable and reasonably safe Money Management, choose the right assets, time and strategies for Your Online trading. Everything essential can be learned for free by the active use of Demo versions for trading and by gradual testing of markets on Llive accounts. If you decide to actively participate in this business, we wish You much success.