Share Market for Beginners - Online Share Trading with Confidence

Share traders are in the business of figuring out whether stock prices are headed upwards, downwards, or neither of the two. In order to do this effectively, they monitor the health of the great economic engine that feeds into companies on many levels – from the very broad to the highly specific. On a broad scale, they want to know what sort of conditions are going to characterize the economic backdrop with respect to interest rates, inflation, and liquidity. All of these factors will determine the sorts of decisions businesses and consumers will need to take, and this will ultimately have a strong bearing on any given company’s share price outlook.

Traders will then try to ascertain which sectors show the strongest signs of life, looking ahead. This will have a lot to do with the broader economic determiners. For instance, when a recession is anticipated, it’s natural to expect “defensive” sectors to reap the most fruit. These would include health care, utilities, and consumer staples, which tend to get top priority in consumers’ budgets when money is tight.

Then there’s the company-specific information that, in a much more direct way, pulls the strings behind share price movements. Examples of this include changes in management, decisions to acquire other companies, or high-profile court cases touching on the firm.  

Finally, traders will make use of technical analysis to spy the deep-lying trends guiding sentiment towards their asset. Fibonacci Retracements, for instance, aim to pinpoint the price levels where traders habitually reassess their attitudes to a given stock, whether to perpetuate its current trend or turn it around.

In this article, we’ll trace the share price movements of two well-traded stocks from the broadest economic stratum down to the narrowest and, in so doing, offer our own introduction to the share market for beginners. The aim is not to come to a conclusion about whether to open a “buy” or “sell” deal on either of the stocks mentioned. Rather, it is to illustrate how analysts go about the business of assessing the direction their prices might take in the future.

A Broad Economic Outlook

In 2024, Economists did their best to forecast the likelihood and timing of a recession but could not come to a consensus. By mid-year, the downturn had still not materialized but some maintained it was just around the corner. Their suggestions of which sectors were due to bloom depended on which scenario would, in fact, materialize. As we mentioned, a recession would be bullish for the “defensive” sectors. On the other hand, in the event the world economy chugs along cheerily, other sectors would benefit. Two examples of these sectors would be consumer discretionary and industrials. Below, we’ll discuss one case study from each of these sectors, but let’s start with a prologue to the former.

The Consumer Discretionary Sector

This sector incorporates companies that deal in nonessential items like vacations, automobiles, clothes, and cosmetics. Understandably, these firms hope consumers will have plenty of spare cash in their wallets and the confidence to spend it. High inflation and elevated interest rates are normally considered headwinds for this sector because they deplete those extra funds people have available. Despite the prevalence of both factors in 2023, US consumers went out and bought anyway, and this buoyed up the sector substantially.

What gave consumers the wherewithal to go out and spend was a rise in real wage growth – workers’ wages when taking account of inflation. This, in turn, was made possible by the combination of a tight labour market and cooling inflation rates. As a result, people felt they had something to go out and shop with. In 2024, prospects of interest rate cuts and further improvements on the inflation front acted bullishly for the sector, encouraging people to purchase pricier items. Let’s meet one of the biggest presences in the sector.

Tesla

Elon Musk’s highly valuable clean energy company makes electric vehicles (EVs), batteries, solar panels, and similar products. The first part of 2024 was rough for Tesla, forcing Musk to lay off large numbers of staff. Despite the move, Tesla shares wouldn’t budge much between May and July. In that month, however, they made up for lost time, gaining as much as 38% in only eight days. Part of the reason was a positive report they gave on Q2 deliveries, which beat analysts’ predictions. Another relevant factor was a rebound in demand from the huge EV market in China.

On July 5th, analysts weren’t sure how the demand picture would develop, considering the robust competition facing Tesla in China from other EV makers. They applied a technical indicator called the RSI (relative strength index) to Tesla share prices to ascertain whether they were overbought (indicating they may soon drop), or oversold (showing bullishness ahead). The reading came back over 80, suggesting a bearish turn was due. On the other hand, stock prices overtook their 200-day moving average – another technical indicator, in this case hinting at a rise in prices.

Let’s skip over to a different sector: industrials. This category encompasses the businesses that manufacture capital goods (goods that aren’t consumed, but are used to produce other goods, for instance machinery). Companies operating in aerospace and construction belong here.

The Industrials Sector

In 2023, industrials failed to keep up with the S&P 500 (a gauge for the broader market) but this isn’t necessarily a sign of weakness. In truth, the S&P 500’s gains were driven by a small number of firms in the technology and communications sectors that signaled their commitment to AI (artificial intelligence), where most of traders’ enthusiasm was concentrated. Reasons for bullishness on industrials include the US government’s pledges for federal funding in the 2021 Infrastructure Investment and Jobs Act and the 2022 Inflation Reduction Act. Healthy flows of capital into US infrastructure could set up the sector for long-term growth.

Turning to the demand picture facing aerospace firms, the desire to travel continued to gain momentum in its recovery from pandemic restrictions. Emerging markets like India and China also exhibited a keenness to travel. If these trends continued, beneficiaries could include airplane maker Boeing, jet engine manufacturer General Electric, and FedEx – the transportation company that specializes in moving industrial equipment. Speaking of which…

FedEx Corp.

Starting in 2023, CEO Raj Subramaniam focused his efforts on streamlining the company’s operations by trimming unnecessary expenses. Thus, in the year preceding March 2024, 22,000 FedEx employees were shown the door. By that time, revenues were robust and operating income had grown for three consecutive quarters, both suggesting his strategy was working. FedEx stock surged more than it had done in a year, clocking up gains of 10% in a single day in that month.

Looking forward, Raj applied himself to adapting the firm’s delivery networks to better address customers’ new preference for sending packages overland instead of by air. He also announced plans to buy back $5 billion of FedEx shares, which would likely bolster their value considerably.  

Tips on the Share Market for Beginners

In this section of the article, we’ll mention a few points that may help you build your share trading strategy on a solid foundation. It’s unwise to accept guidance on how to buy stock from daytrading websites or newsletters. Forget about the prospect of scoring a “hot tip” from any of these questionable addresses. Instead, consult reputable financial news sites for your market analysis. This way, you’ll be sure that it’s well-informed and reasonably argued, even if it won’t always be correct. Read as widely among these sources as you can in order to derive a well-rounded view on the economy, your sector of choice, and the stock that’s piquing your interest.

In almost all cases, success in online share trading eludes those who seek a miraculous windfall. Instead, it rests with those who treat it like a small business. This means they approach their cycle of studying and trading with persistence and hard work, happy to learn from their mistakes and pick up useful nuances in the markets as they go. Your trading strategy will be a work in progress, constantly changing as your views mature over time. Using trading simulators can be super-helpful in adding to your confidence without the worry of having real money on the line.

Finally, remember that the most vital resource your small business has going for it is… you. Give yourself enough sleep, nutrition, and ice-cream to keep a smile on your face. You’ll need to be calm and on the ball when you’re in the fast-paced world of online trading, where the timing of your deals makes such a big difference. You’ll also want to be somewhat in charge of your emotions so you can make intelligent decisions along the way.  

When trading with iFOREX, you’ll enjoy the support of a dedicated customer service team, which you can contact by email, live chat, or phone. Plus, you’ll be able to access a well-stocked library of educational materials in both written and video formats. These are geared to assist you in steering your way, slowly but steadily, towards a potential trading success.