How to start trading on stocks and shares in the UK

Trading on shares has the potential to grow your money at a greater rate than in a savings account. Since the advent of the first stock exchange, the market has returned an average 10% per year, while a cash savings account has average 2% interest. Between 2010 and 2020, Goldman Sachs noted that the US stock market’s S&P 500 increased its average annual return to 13.6%. Successful traders can achieve even more than that — and if you make the right call, you can even bet successfully on prices falling with stock shorting strategies​.

A stock market or stock exchange is a financial market in which company stocks are bought and sold. The prices of shares listed on these exchanges are not set by individual companies or the exchange, but by the organic forces of supply and demand. As an equity becomes more desirable and more traders buy it, its price will naturally rise.

Stock markets exist in major cities around the world; see here for stock market trading hours​. The main ones include:

The stock market works by bringing together buyers and sellers on one platform and enabling them to transfer ownership of stocks and shares. Prices of individual stocks are determined by supply and demand. In stocks and shares trading, traders aim to buy stocks at a low price with the hope that the share price will rise in the future so they can cash out on the price increases. However, they stand to lose money if the stock price falls.

A company initially lists shares for sale when it wants to raise significant capital to fund its continued growth. In making shares of the company available to outside investors, it transitions from a private (for example, privately owned) company to a public company.

The shares are traditionally put up for sale through a process known as an initial public offering (IPO)​, although some companies can use a special purpose acquisition company (SPAC)​ that helps to ‘piggyback’ private companies onto the stock market. However, once the shares become available, they are then bought and sold on the stock market as supply and demand dictates.

Share trading is the process of opening long and short positions (buying and selling) of company stock using derivative products with the aim of watching and reacting to the market over a relatively short time to gain profitable stock returns. This isn’t the same as share dealing (otherwise known as investing), which involves buying a stock and holding it for long-term gain, possibly over many years. At CMC Markets, our trading platform offers derivative share trading as an alternative to long-term investing. There are benefits and drawbacks to both strategies, so read more in our guide to trading vs investing​ to see which may be more suitable for you.

Here are the two types of derivatives that you can trade with us:

The price of a stock is ultimately determined by supply and demand. But what drives this? How might you tell if a stock is about to go up or down? As you learn how to trade stocks, here are a few factors that can help you decide which way to bet on an individual stock.

Major stock exchanges require businesses to release information on their financial performance. If a company exceeds profit and/or revenue expectations, the share price is likely to increase. But if a company misses its targets or underperforms against its forecast, the price will likely go down.

Macroeconomic forces such as interest rates, inflation and GDP (gross domestic product) can cause shifts in the supply and demand of all industries and therefore all have a knock-on effect on share prices. Traders may keep an eye on the news for events and announcements that may impact the economy as a whole or individual sectors.

Elections, trade wars, law changes, strikes and other politically motivated events can cause major disruptions and changes in markets. For example, if legislation is about to loosen around a certain industry, it could improve profitability in companies in that sector, and therefore their share prices. Conversely, a trade war might drive a stock price down. If a company is working in an industry that is closely related to political agendas, an event such as a trade war can cause a stock to decrease in price.

Analysts and market commentators often split stocks into different categories, dependent on the type of company, value or what they offer, including the following.

If you think the price of a particular stock will rise, you can ‘buy’ or go long. However, if you sell too early, you risk losing potential gains. Wait too long and the price might fall, even below what you paid for it.

If you think the price will go down, you can ‘sell’ or go short, which is when you borrow shares from a broker, at a defined interest rate, and then sell them. Then, if the price goes down, you can buy them back at that lower price, making a profit.

When spread betting or trading CFDs, you can trade on over 9500 shares and ETFs on our award-winning platform that is available on both desktop and mobile devices, Next Generation. Designed to be adaptable to your specific trading needs and suitable for traders of all levels, our platform facilitates online share trading by combining the latest innovations with an easy-to-use interface.

Learn more about our trading platform >​

Share trading, like all speculation, carries risk. Even though, with us, you are learning how to speculate on shares rather than invest, you are still exposed to the same dangers — stock prices going down, a company suddenly going out of business, or the entire market crashing, such as in the financial crisis of 2008 when the FTSE 100 nearly halved in value in just a few weeks, or in March 2020 when the Covid-19 pandemic wiped billions of dollars off share prices in a couple of days.

You can manage this risk, however, through diversification across multiple companies and sectors, to prevent putting all your traded eggs in one basket. Certain types of stock tend also to carry less risk than others – blue-chips are statistically more likely to be reliable, but calamity can happen to any company at any time. Read our risk-management guide​ for advice and tips before placing a trade.

Yes, and the main fees applicable include the following: