What is a stock split?

A Split is a market event whereby a company decides to divide its existing shares into multiple shares according to a certain ratio, i.e 1:5 or 1:3. For example if the ratio is 2:1, the stockholder will have 2 shares for every share previously held. As a result, the value of each share is lowered by the same ratio to offset the artificial rise in value, whilst maintaining the same overall value. The way we respond to a split is by adjusting the original opening rate of the affected trade to reflect the new rates after the split and ensure that all subsequent profit calculations are correct.