completely new to trading - few Q's.

[dboy007]

am completely new to this world and prior to 2 days ago new absolutely nothing (not even the concept of trading). well i just read all 12 chapters on "share school" over at Financial Advice, News, Help & Guides from This is Money UK and found it very easy to understand and extremely interesting. i can see how people get hooked on trading....

although i pretty much understood most of it i didn't really get the part about futures and options. just wondering if someone could explain them to me in the most basic way possible (i.e. as if you were speaking to an alien).

also, the website stated:

"You make money from shares in two ways: Capital growth - where the share increases in value, and dividends - payments taken from profits the company makes to its shareholders, usually every six months."

is this to say you make money from both these ways or from one or the other?

 

[timsk]

Hiya dboy007,
Welcome to T2W.
For options, have a gander at this. Also have a good look at the other articles in the 'First Steps' section.
T2W Day Trading & Forex Community
Your other query about value and growth relates more to investing than it does to trading. The focus of this site is on trading, although many here are also investors. The main difference is timescale. Broadly speaking, traders fall into three categories: day traders (trades lasting from seconds to a few hours), swing traders (trades that last from a few days to a few weeks) and position traders (trades that last from a few weeks to a few months). After position traders come investors who hold positions from months to many years. Major 'blue chip' companies (FTSE 100) struggle to grow because they've long since reached maturity (e.g. oil giant BP) so they're never going to set the world on fire. So they offer investors dividends to encourage share ownership. On the other hand, a young company that's making a name for itself doesn't want to pay dividends because it wants to re-invest all its profits into R&D and expansion, i.e. growth. However, the plus side is that it's share price may increase dramatically if it does well. Microsoft is a good example of this. £10K invested 20 years ago in the company would have been a very risky investment at the time but, as we now know, a spectacularly profitable one! £10K invested in Microsoft today is highly unlikely to return the same reward over the next 20 years but the level of risk to the investor is greatly reduced.
HTH.
Tim.

 

[dboy007]

thanks for the reply. so generally speaking investors are people dealing in shares over a long period, say, over 5 yrs in potentially safe blue chip companies. whereas, traders are more into short-term speculation such as trading over a few hrs/days/weeks to make quick and bigger money? big traders dealing with big money may only make a 3% growth profit, but 3% of £2BN is massive.

sorry if these questions seem really basic, i just want to be sure before i progress to the next steps.

P.S. so this is a website for more short-term speculation (trading)?

 

[timsk]

thanks for the reply. so generally speaking investors are people dealing in shares over a long period, say, over 5 yrs in potentially safe blue chip companies.

Yes - IF they want a relatively low risk investment, i.e. the share price is unlikely to fall much over the medium to long term and they'll receive dividend payments which will probably be more attractive than building society deposit interest rates.
No - IF they are prepared to take a greater risk with the potential of much greater reward. The investment is more speculative in nature and there are unlikely to be any dividends for a long time to come. Many such companies can be found on the AIM index in the U.K.

whereas, traders are more into short-term speculation such as trading over a few hrs/days/weeks to make quick and bigger money? big traders dealing with big money may only make a 3% growth profit, but 3% of £2BN is massive.

" . . .big traders dealing with big money" are a very rare breed. Few, if any that I know of, fall into this category on this website and, of those that might, most work for institutions and trade the firm's money and not their own. Most T2W members are 'retail' traders, i.e. they trade their own money on their own account from home, either part time or full time. The majority start with a small spread betting account funded with a few hundred to a few thousand pounds.

sorry if these questions seem really basic, i just want to be sure before i progress to the next steps.

No problem. Check out the Trading FAQ's in the 'First Steps' forum - lot's of good stuff there.

P.S. so this is a website for more short-term speculation (trading)?

Spot on!
Tim.