What is share dealing in the UK?

 

In simplest terms, share dealing is the buying and selling of shares in UK companies. The UK has a thriving finance sector, which means thousands of different types of shares on offer from dozens of companies. Most people buy shares through a stockbroker – someone who works for a bank or financial institution and follows the markets closely.

 

Shares have been available to trade since 1694 – making them one of the oldest forms of investment available. In this time, they’ve become an essential feature of advanced economies worldwide.

 

On average, around 4 million individual trades are carried out every day on the London Stock Exchange’s order book – its system for matching buyers with sellers. Intraday turnover is around £100 billion a day, more than double that of any other stock exchange in Europe.

 

Every company represents a collection of shares – which people invest in it. If you buy shares, you’re buying a stake in that company. The price for those shares on an open market will change as things happen. For example, if a company does well and makes a profit, its share price goes up because investors want to own a piece of it. It makes sense because the company will make money on their investment to sell it at a higher price. But if something terrible happens – orders drop off, or someone loses their job – its share price will decrease.

Investing is risky, but it can also be enriching. Over time, shares have tended to go up in value so that a well-chosen portfolio can provide you with a nice stream of income in retirement.

There are a few different types of share dealing:

  • Market dealing: This is when you buy and sell shares on the open market, through a stockbroker
  • Limit order: This is an order to buy or sell shares at a set price – or better. For example, you might put in order to buy shares at £10 each, no matter what the current market price is
  • Stop loss: This is an order to sell shares if they fall below a specific price. For example, you might set your stop loss at £8, meaning that if the share price falls to £8 or below, your shares will automatically be sold
  • Take profit: This is an order to sell shares if they reach a specific price. For example, you might take profit at £12, meaning that you’ll sell your shares as soon as they reach £12 each

Stockbrokers

Most people use a stockbroker to buy and sell shares. Stockbrokers are professionals who work for banks or financial institutions and follow the markets closely. They can help you find the right shares to invest in and make sure your orders are filled quickly and efficiently.

 

When dealing with a stockbroker, you usually deal with a market maker or system. It means that if you trade in shares, they’ll have a matching order from another customer who’s selling simultaneously. Again, the price for those shares on an open market will change as things happen to the business.

For example, a company does well and makes a profit; its share price goes up because investors want to own a piece of it. But if something terrible happens – orders drop off, or someone loses their job – its share price will decrease.

In conclusion

Investing is risky, but it can also be enriching. Over time, shares have tended to go up in value so that a well-chosen portfolio can provide you with a nice stream of income in retirement.

 

Visit the London Stock Exchange and stockbrokers’ websites to learn more about how to share dealing works.