A complete guide to share trading

Trading stocks involves the buying and selling of shares in publicly-traded companies, with the goal of making a profit. When you trade with us, instead of owning the stock outright, you speculate on price movements using CFDs.

Read on to learn all about this popular asset class, including what the most-watched companies are, and how to trade share CFDs with Capital.com.

What is share (or stock) trading?

The terms ‘stocks’ and ‘shares’ are often used interchangeably – but there is a subtle distinction between the two. Stocks represent ownership in a company, comprising a proportional stake. Meanwhile, shares denote the individual units of this ownership, with each share representing a single unit of stock.

In this guide, we use the two terms interchangeably but our official name for the asset class, and the one we use on our trading platforms, is ‘shares’.

Shares trading is the process of buying and selling company shares listed on a stock exchange. Although it’s possible to buy and sell physical shares of a company stock (typically through a traditional stockbroker), most retail brokers offer speculation on a derivative of the share. This is facilitated through financial instruments like contracts for difference (CFDs). It’s important to consider that CFDs are a high-risk form of trading due to the way in which leverage magnifies the risk that traders take on.

There are many different types of stocks, including:

• Blue-chip stocks: These are from well-established, large-cap companies. They may exhibit greater price stability, making them more resilient during market volatility compared to less-established companies. However, blue-chip stock prices can also show periods of instability, resulting in the risk of loss as well as the chance to profit.
• Growth stocks: These stocks may demonstrate above-average share price appreciation over an extended period.
• Value stocks: These stocks trade at relatively low prices considering the company’s fundamentals, such as sales, profits or dividend payments.
• Penny stocks: These are stocks representing small companies that tend to trade for less than $5 per share in the US.
• Dividend stocks: These stocks provide regular payments to investors for each share they hold.
  
  

Popular shares to trade

While the popularity of specific stocks varies over time – being influenced by various factors such as market trends and macroeconomic events – there are several categories of stocks that consistently draw the attention of traders. This is mainly thanks to their historical performance, market capitalisation, and liquidity.

One such example is blue-chip stocks. These are from large, well-established companies with a history of stability and reliability. Such stocks are often favoured by traders for their perceived safety and long-term growth potential. Examples include industry giants like Berkshire Hathaway Inc., Microsoft, Apple, Walmart, and Coca-Cola.

Another example is cyclical stocks. These are companies that tend to perform well at key parts of the economic cycle. Successful stocks during economic upswings may be found in sectors like industrials and materials, such as Caterpillar and Boeing. Conversely, during economic downturns, defensive stocks in healthcare, utilities and consumer staples can fare well.

In terms of shares from specific sectors, there are a handful of sectors which have consistently captured traders’ attention in recent years.

These include:

• Tech: Technology companies – especially those in the FAANG group (Meta (formerly Facebook), Apple, Amazon, Netflix, and Google’s parent company, Alphabet) – have been perennial favourites for stock traders. These companies often exhibit strong share price growth, and their constant innovation presents ongoing high-growth potential. 2023 saw the rise of the ‘Magnificent Seven’ group of stocks, comprising Apple, Microsoft, Alphabet, Amazon, Nvidia, Tesla and Meta. However, it’s important to remember that large tech stocks can also suffer sustained bear runs and market volatility.
• Healthcare: Companies across the healthcare sector, including pharmaceutical, biotech, and healthcare services companies, are another popular stock trading option. Such as Moderna, Pfizer & BioNtech. Developments like new drug approvals and clinical trial results can significantly impact stock prices in this sector, offering potential trading opportunities. Much like big tech stocks, market leaders in this sector are at the forefront of innovation, creating high-growth potential.
• Online retail: E-commerce giants like Shopify, eBay, and Alibaba have become more attractive to traders in recent years in line with the rise of online shopping.
• Electric vehicle (EV) and renewable energy: Stock trading in the EV and renewable energy sectors is becoming more popular, driven by a growing societal focus on sustainability. Pioneers like Tesla, NIO and solar companies like First Solar are gaining immense popularity.

Some stocks, as well as being popular among traders for their historical performance and high liquidity, are also used as broader market barometers, with the energy sector one such example. Traders often monitor the stock prices of energy giants such as ExxonMobil and Chevron due to their connection to global oil and gas markets. These stocks can be affected by changes in individual energy prices as well as wider geopolitical events.

Similarly, traders may keep an eye on the share prices of companies in the financial sector, such as publicly-traded banks, of the likes of Barclays or Lloyds. Monitoring share prices in this space can help traders gauge how the overall economy is faring as any fluctuations can often reflect investor sentiment, credit availability, and the impact of economic policies.

Learn more about IPOs.

Why do traders trade shares?

Here are some of the most common reasons why a trader would place a stock trade – either using a CFD, or by buying the stock outright.

Profit potential

For many, the primary motivation for trading stocks is the potential for financial gain. For long positions, traders aim to buy low and sell high, capitalising on price rises. Short positions – only available when you’re trading shares using derivatives like CFDs – aim to capitalise on price falls.

Unlike long trades, short positions can result in potentially unlimited losses if the market goes against you.

There are various ways to approach stock trading, with day traders seeking quick, short-term gains through intraday price movements, swing traders aiming for profits over a few days to weeks, and position traders managing longer-term trades that are sometimes open for many months or even years.

Diversification

Traders can build a more diverse, balanced and resilient portfolio by managing stock positions across different sectors. This can help to mitigate the impact of a poorly-performing stock or a downturn in a particular sector.

Flexibility

Whether you choose to go long or short on individual stocks with CFDs, diversify with exchange-traded funds (ETFs), or even broaden your stock exposure by trading a wider index, stock trading can be tailored to meet various financial goals and lifestyles.

How to trade stocks with leverage

Although you can buy and sell physical company stocks through a stockbroker, you can also trade stocks without owning the actual shares. You can do this using contracts for difference (CFDs) to take a position on the underlying price.

Unlike buying and selling stocks outright – which requires the share price to go up for you to make a profit – trading stocks with CFDs gives you the opportunity to speculate on rising and falling share prices.

CFDs give you access to leverage, which can mean faster, larger profits and losses than buying shares outright. So it’s important to be aware of the risks before you trade.

Learn more about CFD trading.

Costs involved in stock CFD trading

As with all of our markets, when you trade share CFDs with us, you’ll pay a spread. The value of a spread is dynamic, and is based on the difference between the buy price and the sell price of the fluctuating market.

You may also pay additional fees, for example if you use a guaranteed stop-loss* or if you hold a position overnight. You won’t pay any commission when you trade share CFDs on our platform.

You should always ensure you’re aware of the cost of trading before you open a position. You can do this via our charges and fees page.

*Stop-losses are not guaranteed, but we offer guaranteed stop-losses (GSLs) for a fee. You can check the GSL fee value in a deal ticket when opening a position and adding a GSL

How to trade share CFDs with Capital.com

You can trade share CFDs with us by following these steps:

• 1. Choose a stock CFD to trade, based on your trading goals
• 2. Decide on your trade size
• 3. Consider applying a stop-loss to manage risk
• 4. Open your position long or short
• 5. Manage your position, monitoring fundamental and/or technical drivers
• 6. Close your position

Share CFD trading examples

Why trade share CFDs with Capital.com?

We’re proud to have won a range of awards from some of the leading authorities in the trading world, including Best CFD Provider 2023 at the Online Money Awards. We’re rated Excellent on Trustpilot, and we’re always working to improve the experience of our 720,000+ clients.

Here are just a few reasons to choose us for share trading:

• Clear, easily-navigable interface across desktop, app and tablet
• Rapid withdrawals*
• Multiple chart types and 100+ technical analysis tools
• Comprehensive education via courses, videos and webinars, as well as an in-platform, asset-specific Reuters feed
• Round-the-clock support

*99% of withdrawals are processed within 24 hours, according to our internal server data from 2024.

Frequently asked questions