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What are shares, and how does trading shares work? 
What are shares, and how does trading shares work? 
Updated over a week ago

When a company wants to raise capital, usually in order to take their operations to the next level, its directors may opt to “go public,” which is also known as holding an IPO, or initial public offering. This involves selling shares in the company to public investors. Once these shares are floated on public stock markets, they are available for all registered traders to buy and sell.

A stock, or a share, is essentially just a small fraction of a company. So, if a company only issues 100 shares and you purchase ten of them, then you own 10% of the company. This is obviously a vastly simplified example. Apple, for example, currently has around 17.5 billion outstanding shares.

Now, depending on the stock in question, holding shares can entitle holders to a dividend payment, as well as a voting say in board meetings (proportional to the amount of stock that is owned). Most traders, however, are more interested in trading the price swings rather than holding for long periods of time.

The world’s largest and most developed stock market in the world is in the United States, which accounts for almost 60% of all global stock market activity. Just to give you a sense of how big US stock markets are, they are ten times larger than the number 2 stock market in the world, which belongs to Japan, but only accounts for around 6% of the global market.

Historically, too, the practice of holding a portion of one’s net worth in stocks has been much more prevalent in the United States than elsewhere.

In Europe, investors are much more familiar with foreign exchange, owing to the fact that they have historically had to be much more aware of the changing value of all the different national currencies. Even after the inception of the euro, foreign exchange plays a bigger role for European investors than it does for those from the US. This is because the US dollar is the world’s reserve currency and so US investors rarely have to take foreign exchange into account.

The stock market is enormously important to the economy of the United States and has been massively influential in the development of trading itself. Contrary to popular belief, much of technical analysis, which is the study of chart patterns and how market cycles and trader sentiment are reflected in chart price action, was actually pioneered by stock traders.

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