Stocks

Stock Market

Stocks or shares are securities that signify ownership in a corporation and represent a claim on part of the corporation’s assets and earnings. Company stock values tend to fluctuate depending on how well the company is fairing, what kind of sales and gains it reports, how popular the latest product releases are and of course what is the outlook on future demand.

When trading Stock CFDs, you are not buying the actual security, but you are rather speculating on the future value of that stock.

Popular stocks

Defining “popular” stocks can be extremely challenging as it all depends on context and geopolitical happenstance. Most analysts would agree that the major stocks which compose the world’s leading indices, could be considered the most popular, and admittedly most well-performing stocks of the markets. These would include major names such as Apple (AAPL), Amazon.com (AMZN), Microsoft (MSFT), Facebook (FB), Disney (DIS), Netflix (NFLX) and the burgeoning electric vehicle darling Tesla (TSLA), all of which are included in the S&P 500.

How to trade stocks?

The stock market is full of potential trading opportunities, with thousands of stocks to choose from and with major exchanges opening in different parts of the world, you can trade stocks CFDs from Monday to Friday. However, before you start buying and selling stocks CFDs online, you will need to make sure you have a strategy and a good understanding of the risks involved. As with all leveraged products, CFD Stock Trading can multiply earnings as well as losses. It is therefore always a good idea to test your strategies on a demo account prior to trading with your own funds.

What affects stocks?

There are several factors that can affect stocks prices. Firstly, a company’s earnings reports which are released quarterly, are considered a crucial factor when it comes to stock pricing. Typically, the more the company earns, the more expensive its shares become. A second factor affecting stock prices is the health of the rest of the industry sector. Generally, if tech companies are boding well, there will be an overall bullish trend across the industry. Other factors include changes in company management, any reported scandals, analyst projections, new product hits or flops, big announcements, and even big marketing campaigns.

Trading Example

When trading Stock CFDs, you first need to choose the stock you wish to trade and then determine the direction of your trade. Based on your research, you must decide if you wish to go long and ‘buy’ the stock or go short and ‘sell’. Then you need to determine your position size. It is important to remember that stocks are traded in units. A single CFD contract will therefore equal a single company stock. Individual stock prices may vary depending on the company you are trading, from a couple of dollars to thousands of dollars, it is important to consider the price of the individual stock before placing a trade.

Let us suppose you wish to Buy Apple Stock CFDs at $120, because you think the price of the stock will appreciate. You wish to buy 10 units or contracts so your total exposure would equal $1200. Assume you are trading with 1:5 leverage, this means that in order to place your trade you only need to have a 20% in margin (plus any commissions) to place your trade. This means that you could place a $1200 using only $240.  Remember, that because you are trading with leverage and your total position size is $1200, it is possible to lose more than your initial position margin of $240, if the price of Apple moves lower.

Benefits

One of the major benefits of trading stocks with CFDs is that you can speculate on both directions. In traditional investing, you would need to wait for an opportunity to only Buy the actual stock of a company and hold until the price appreciates. Being able to speculate on both rising and falling prices adds greater flexibility to your trading strategy.

You can also use “margin” or “leverage” when trading CFDs. As we previously noted, leverage provides the opportunity to take significantly larger positions without investing an equally significant amount of capital. However, leverage can be a double-edged sword, since large price swings can result to magnified gains as well as losses.

Risks

As with all trading, speculating on stocks CFDs involves the risk of losing more than the margin you used to place certain positions. Volatility and force majeure events that can lead to significant and unpredictable price swings are some other risk factors you need to consider.