A share is a claim on a real business. That single fact makes equities the most analysable market available: companies are legally required to publish their results, so you can read the actual numbers behind the chart.
How the market is structured
| Aspect | Detail |
|---|---|
| Hours | Exchange-specific. London 08:00–16:30 UK; New York 14:30–21:00 UK |
| Pre/post market | Trading outside those hours exists but is thin, wide-spread and volatile |
| Settlement | Typically T+1 in the US and T+2 in much of Europe |
| Ownership | You own an actual asset with voting rights and dividend entitlement |
| Data | Published quarterly or half-yearly results, filings, analyst coverage |
The fixed hours have a direct trading consequence: equities gap. News arrives overnight and at weekends while the market is shut, and the price simply reopens somewhere else. A stop-loss cannot protect you across a gap.
What moves individual shares
- Earnings. The dominant scheduled catalyst. Four times a year a stock can move 10%+ in a single print.
- Guidance. Often matters more than the results themselves — markets price the future, and management's outlook is the freshest information about it.
- Interest rates. They change the discount rate applied to all future profits. High-growth companies are the most rate-sensitive.
- Sector rotation. Capital moves between sectors as the economic cycle turns. A good company in an out-of-favour sector can drift for a long time.
- Index inclusion. Joining a major index forces passive funds to buy — a genuine, mechanical flow unrelated to fundamentals.
Indices: trading the market itself
An index tracks a basket — the S&P 500, FTSE 100, Nasdaq 100. Trading an index means taking a view on the market or economy rather than one company.
| Individual stock | Index | |
|---|---|---|
| Volatility | Higher — company-specific risk | Lower — diversified across holdings |
| Gap risk | Severe around earnings | Much lower; no single earnings event |
| Research burden | Company by company | Macro and breadth |
| Upside | Can multiply | Steadier, more modest |
| Blow-up risk | A single fraud or warning can halve it | Effectively nil at index level |
Sectors and the cycle
Sectors respond differently to the economic cycle, and knowing roughly where you are in that cycle explains a lot of relative performance:
| Type | Examples | Tends to lead |
|---|---|---|
| Cyclicals | Industrials, consumer discretionary, banks | Early recovery |
| Growth | Technology, communications | Falling-rate environments |
| Defensives | Utilities, consumer staples, healthcare | Late cycle and downturns |
| Commodity-linked | Energy, materials, mining | Inflationary and supply-driven periods |
Practical points for new traders
- Liquidity varies enormously. Large-cap shares fill instantly; small-caps have wide spreads where the screen price is not the price you get.
- Dividends adjust the price. On the ex-dividend date the share drops by roughly the dividend. That is not a sell-off.
- Short selling is constrained. You must borrow the shares, pay a fee, and can be forced to close if the lender recalls them.
- Currency risk is real. A UK investor buying US shares takes a GBP/USD position whether they intended to or not.