Key takeaways
- Shares represent ownership in companies and trade on exchanges during set hours.
- Indices group shares into one number and are widely traded through funds and derivatives.
- Shares bought outright can't lose more than their value; leveraged products can.
Shares
A share is part-ownership of a company. Its value depends on what investors expect the company to earn, and may be supported by dividends. Unlike a currency pair, a share has a single price in its own currency.
Exchanges
Shares trade on exchanges such as NYSE, Nasdaq, the London Stock Exchange, Deutsche Börse's Xetra and the Tokyo Stock Exchange. Each operates an order book during its session, with auctions at the open and close.
Indices
An index summarises a market or sector: the S&P 500, FTSE 100, DAX and Nikkei 225 are the best known. Traders often follow index prices the way FX traders follow EUR/USD. See stock indices explained.
Compared with forex and crypto
| Stocks | Forex | Crypto | |
|---|---|---|---|
| What you own | Part of a company | A currency position | A token |
| Income | Possible dividends | Swap (can be positive or negative) | None inherently |
| Gaps | Between sessions, on results | Mostly over weekends | Rare (market never closes) |
Ways to get exposure
- Buying shares through a broker.
- Index funds and ETFs.
- Share and index CFDs (UK/EU retail limits: 5:1 on shares, 20:1 on major indices).
Risks
Individual shares can fall heavily; indices can decline for years. Leverage magnifies losses. Currency moves affect foreign holdings; see the forex guide.
One world stock market, or many?
There is no single global exchange. The world stock market is a network of national exchanges, from New York and London to Tokyo and Mumbai, open at different hours. Global share market indices, such as the MSCI World, combine many of them into one measure.
Common questions
What is a stock split?
A company divides each share into several, lowering the price per share without changing the total value held.
Why do share prices gap at the open?
News released while the market was closed is priced in at the opening auction.