Equities Trading Defined

Equities trading is the purchasing and selling of corporate stock shares on public exchanges or in over-the-counter markets, whether they’re domestic or foreign. Although similar to the stock market, equities trading is much more complex, involving many kinds of securities. This kind of trading can be and is done 24 hours a day, seven days a week, 365 days a year, and forms a huge portion of the global economy. Among other factors, equities trading rates act as economic indicators by which financial analysts gauge the fiscal status of world markets.

What Is Equity?

“Equity” in investment matters is defined as the amount of interest that ownership holds in a corporation, embodied in the form of company stocks, whether common or preferred. It can also refer to the total amount of corporate assets minus the sum of corporate total liabilities, which is called shareholder equity, net worth, or book value. In relation to futures trading, equities are the values of the securities being traded; in a brokerage account, equity is the net value of the account, meaning the value of the securities in that account minus any marginal requirements.

What Are Securities?

Securities are investment instruments that are issued by corporations, governments, and other organizations to give evidence of debt or equity, excluding life insurance policies and fixed annuities. Some examples of securities are stocks, bonds, U.S. Treasury notes, interests in profit-sharing agreements, shares of royalties or leases of mineral and other mining rights, certificates of deposit, and collateral trust certificates. Each of these instruments has a physical, monetary value that can increase or decrease depending on market trends and economic indicators.

Where Does Equities Trading Take Place?

Typically, equities trading is done through the major national stock exchanges, such as the New York Stock Exchange. Other large international markets are the London Stock Exchange, which is mainly for the European market, and the Tokyo Stock Exchange, which is the main Asian and Oceanic market. Each stock exchange has its own particular market makers, which limit volatility (price fluctuations) by purchasing and selling the shares of particular companies on behalf of their clients and themselves.

How Does It Work?

Equity trading is done electronically, with buying and selling orders matched by computer, by almost every exchange worldwide. Owners of the securities can trade equities, or agents, or brokers, may handle them for short-term profit or longer-term investment. Agents are paid commissions. Money is made or lost when the spread, or difference, varies from the original price of the security as determined by market makers. Equities can be traded as a combination of stocks and options, called arbitrage, or stocks can be bought to capture their dividends.

Equities trading is a complicated system of generating income used worldwide. Equity traders are highly trained to be experts in their fields and make high commissions for their services. This intricate system of valuing and devaluing securities is one of the financial arteries that speeds growth and development.