What Is Equity Trading?

Trading equities involves more than stock trading. Equity trading in the public markets can involve many different securities, requiring diverse strategies and trading skills. Skilled traders will know the related trading strategies that complement their objectives.
Definition
1. Trading equity refers to the universe of stocks, options and preferred stock in public markets. Equity trading specifically eliminates debt trading.
Where Does Equity Trading Take Place?
2. Trading equities usually takes place in public markets, both domestic and overseas. Equity trades can take place at almost any time of the day or night. Trading securities not on a listed exchange involves cost inefficiencies due to lack of liquidity. It is possible to trade equities through the futures markets.
The Electronic Market
3. Equity trading now involves the electronic matching of buy and sell orders. This is true for almost all exchanges. Large orders on the New York Stock Exchange (NYSE) are sometimes handled by specialists.
Bid and Offer Price
4. Equity markets provide a bid and offer price for every trade. The difference, or spread, is earned by market makers that make trading profits from the constant buying and selling of stocks by the investing public.
The Many Forms of Equity
5. Common stock refers to the proportionate ownership of a company. Preferred stock has both equity and debt-like components. Equity trading also refers to options, warrants and convertible preferred stock.
Trading Techniques
6. Equities may be traded for short-term and long-term profits. Equities can be traded as part of a technique combining the value of options and stocks. This is called arbitrage. Stocks bought to capture stock dividends is another popular strategy.