T2W Trading Community

Individual Shares

Trading in individual shares must be the most favoured trading product available. Hasn't been around that long, seven years or so when IG Index realised that there was a great deal of demand for trading in shares within the FTSE100.

The shares that you can trade now are vast and varied. All the FTSE100/250 is there, most major and some minor US shares including NASDAQ and technology shares.

The good news about being able to trade individual shares is that they are no different to trading the indices. The gearing is the same throughout all the products available to you (options however differ but I wont cover those here as they are very complex).

There are plenty of benefits trading in shares. Let’s use Microsoft (MSFT) as an example. These shares are currently in the region $55.00 per share. By share I mean standard share certificate, owning part of the company. However most people buy shares do so as a long term investment of 2 to 3 years, and look to make a profit over that period.. You would need a great deal of money to buy even just 100 shares, around $5,500 in fact. Now if we bought the real share we'd have to pay this $5,500 and be out of pocket of $5,500 and now if the share rose up 10% to $60.50 and we sold we would get $6050.00 that is great. BUT! We might have to pay TAX on the profit as it’s classed as a capital gain. Also, we would have to pay the broker a fee to buy and to sell, plus the $5,500 we put in isn't available to us while invested.

Whereas if we opened a spread trade, we don't own the share and we could have made anything from 1p to £500 per 0.01p price movement. At £1 trade going long we would have made the same profit, but would have kept it all as financial spread betting is tax free and we don't pay our financial bookmaker. Plus, were risking far less, not putting thousands of pounds into one share, our position is highly fluid, can easily be closed. Finally, we could have geared up our position by adding more to the trade as it went up. We could have started at £1 per point then moved to £10 easily and instead of making $550 we would have made $5,500 instead - for the same amount of work.

Not to forget to mention that the biggest difference between trading in REAL shares and owning a part of that company and trading in financial spread betting, is that with financial spread betting we can make a fortune when the price of ANY share, indices and many other financial products go DOWN. It does make me realise why people really look to make money from shares in the short term.

My changing currencies may confuse some of you. My local currency is the GBP £, but the example I gave was Microsoft who are American and therefore quoted on the S&P500 (Standard & Poor’s 500 - another index). You don't have to worry too much about trading in differing currencies. Everything is worked out for you. When you open most financial bookmaker accounts, you can decide the currency you wish to have your account shown in and therefore be trading in. I personally use GBP £ but it doesn't matter if you choose the USD $ the AUS $ or whichever currency you feel comfortable trading in.