by | Feb 8, 2021 | Weekly Tips

What is a Stock Exchange?

Advantages and Disadvantages of an Exchange

The Stock Market & Concepts of Trading

Advantages of  Trading on a Stock Exchange:

  • The cost of trading compared to other investment vehicles is relatively low.
  • The value of a stock/share can be known at any time by accessing the share price through a stock broker or trading platform.
  • With the use of online trading platforms, trading on a stock exchange is simple and easily accessible.
  • Due to high volumes of traders, one has a greater opportunity to sell shares to waiting buyers.
  • With knowledge on trading, trading can offer a higher return of investment than any other type of investment.
  • Profitable companies pay regular dividends to shareholders.
  • Stock Exchanges maintain strict rules and regulations, reducing risk of fraud.
  • Trading requires a smaller capital outlay than an investment like property, making it more accessible to all.
  • A shareholder owns shares in the traded company, with certain rights, but is not held liable or accountable for any losses incurred by the company.
  • Risk can be minimised with trading discipline and a trading strategy.
  • Access to trading funds is a simple process with little delay.
Disadvantages of Trading on a Stock Exchange:
  • While it is always possible to sell a share, you are not guaranteed of the share trading at the price you want to sell it at, as share prices rise and fall.
  • Trading successfully requires knowledge and dedication.
  • Share prices fluctuate and may result in a profit or loss for the trader.

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