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TRADING STRATEGIESThe stock exchange is where shares are bought, sold and traded, for a company to trade shares on the stock exchange they must be listed on it. Shares are ownership in a company, when purchased you become a part owner/shareholder in that specific company. Any company that lists its shares are known as a PLC which stands for Public Limited Company. Shares have a nominal price, this is the price that it was first listed as when it was issued, and a market price which is the price it is currently being traded at. You can find plenty of resources that have listings of current stock prices, these include the internet, newspapers and television. Companies list on the stock market to help investments and expand the company; company’s can grow quick but also fall fast on the stock market. There are different ways to list shares on the stock market, the first and most common is to “Offer For Sale”. This is where the company outlines to potential buyers what they do, who is on their board of directors and the predicted forecast profits they expect to make. They then set the price of the newly issued shares for people to buy; usually the price is set low to start with to encourage investors to buy into the company’s shares. Another way is by a term called “Placing”, this is usually a private dealing between the company and investors. A “Tender Offer” is another share trading option, this is where investors apply for shares at a price that they are prepared to pay. Once all offers are received the company works out a “Strike” price which is the highest price, at which the shares can be bought, all investors that applied for the shares at this price or higher will receive the shares. Anyone who applied at a lower price will not receive any shares. There are different market indices which indicate the overall performance of the market and let’s people compare individual shares against the performance of a whole market. The FTSE 100 is the index of the largest 100 companies in the UK. The price of this market is updated every minute. The FTSE 250 is the same principal as the FTSE 100 but it lists the top 250 companies. The FTSE 350 is a combination of both the FTSE100 and the FTSE 250. Several factors influence a company’s share price these include the following:
You can trade shares on the stock market a number of ways but you will need to use a stockbroker to utilise these options: Discretionary services – giving the broker complete clearance to buy and sell shares for you without obtaining your prior approval. Execution only services – this is the cheapest as they do not need advice or management - you simply tell your stockbroker which shares to buy and sell for you. The costs of buying and selling shares involve the following:
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