Spread Bets and Factors That Can Affect Shares
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Stock markets are trading forums where a company’s shares are bought and sold. Two of the best known stock markets are the London Stock Exchange (LSE) and the New York Stock Exchange (NYSE) although there are stock exchanges throughout the world. Stock markets are also known as public equity markets.
Investors using the stock exchanges range from individuals, who often trade with relatively small sums of capital, to banks, global corporations, hedge funds and other professional investment groups.
Buying and Selling
The essential underlying feature of a stock exchange is that there is generally no fixed price for any stock. A company’s shares are valued by the sum of trading actions that constitute its worth over a period of time. In other words, a company’s share price is determined by what traders are willing to buy and sell it at.
Whether a share price moves up or down can often depend upon the market’s sentiment towards a company or a sector. This means that when confidence diminishes, share prices can fall sharply. Conversely, of course, increasing confidence can translate into rising share prices. Note that with some derivates products like CFDs and spread betting you can speculate on shares prices to fall.
Past and Future Performance
Profits are realised on the stock market by selling shares for a higher value than you initially bought them for. Since there is no guarantee that any share will rise, it is advisable to be as fully informed as possible about how the stock market works, how your chosen company has performed in the past and what the general trading environment is like.
Even share prices that have steadily risen over a period of time are not guaranteed to keep on doing so in the future. You should consider your financial position in case expected profits turn into losses. As always, only trade with capital that you can afford to lose.
Share Price Determinants
Share prices can be affected by a range of determinants and the full range of these help constitute the market’s combined sentiment. A company’s shares can go up or down in value, depending on its financial performance, as reported in its quarterly, half-yearly or yearly earnings.
Publicly quoted companies are legally required to publish their earnings on a regular basis, typically every quarter. These earnings announcements can give an indication of how the company is performing against its strategy and can also help traders determine how profitable a company is.
Companies can be positively or negatively affected by events such as Chief Executive Officer (CEO) appointments or changes or external events, such as accidents. A CEO may have a good reputation and be seen as key to boosting a company’s value. A CEO’s appointment to a particular company can help boost its share price although it can also depress a share price if their reputation is less than positive. An accident, such as happened to BP with its Gulf of Mexico oil spill, can depress a share price.
Be aware that political events can have an impact by affecting how a company performs in a national context. Public spending cuts, for example, could negatively affect a company’s ability to operate or sell its goods. Likewise companies that rely on exporting goods or importing raw materials can be affected by currency exchange rates.
Spread Betting Comparison - Shares Spread Bets
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| FTSE 100 Shares |
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| FTSE 250 Shares |
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| Wall Street Shares |
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| S&P 500 Shares |
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| Nasdaq 100 Shares |
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| DAX 30 Shares |
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| CAC 40 Shares |
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| Irish Shares |
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| Other Shares |
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The above spread betting markets may also be available with other companies. Also see Comparison Table Notes.
"Spread Bets and Factors That Can Affect Shares" last update by R Thomas, 17-Feb-2010
Warning: Financial spread betting carries a high level of risk. You can lose more than your initial investment or stake. Financial spread betting may not be suitable for all investors. Only trade with money that you can afford to lose. Make sure you fully understand the risk involved. If necessary, seek independent financial advice.
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