Why you should learn how to trade stocks
At its core, stocks trading is a very basic concept – you buy a company’s stock when the outlook is positive and sell to realize your profits as soon as you believe the stock price will stop climbing. As they say; you buy low and sell high. However, recent advancements in tech and the influx of millions of new traders in the financial markets have helped establish new ways to access stock market opportunities.
Stock market trading is widely more accessible today than a few years ago and individual traders and investors have access to tools and services that used to be available only to big banks and financial institutions.
How to trade stocks
We have already established that in order to profit from the stock market, you have to be able to buy a stock at a favorable price and sell it to make some profit before the price drops again. If you are wondering if there is a way to predict a market’s rise and fall, you actually can’t – at least not 100% of the time.
However, with enough information about the company’s current performance including sales and turnover statistics, you can make an educated guess on how attractive its stock will be for other prospective buyers.
The more buyers are after stock, the more it will increase in value and vice-versa. On the other hand, if the company is not performing well or the company’s management is involved in a scandal political or otherwise, you can expect the stock to suffer as less investors will be confident enough to buy.
At the end of the day, it’s all about supply and demand. However, if you want to learn what affects supply and demand, you need to look at the underlying factors such as past revenue reports and earnings per share records. When these are on the rise, the law of supply and demand dictates that the price of the stock will go up as well.
With the advent of electronic trading, opposed to enlisting broker’s running around on the trading floor to buy your shares, you can also find that you can profit from downturns in the market as well without owning any actual stocks in the underlying company.
Take, for example, Apple (AAPL) and its well-performing stock due to the recent hype about the new iPhone series. In case a leak came about just before the launch that the new product lineup wouldn’t have any exciting new features, investors would lose confidence and start selling their stocks in order to not lose too much of their investment due to the falling prices.
Trading stock CFDs (Contracts for difference) with a forex broker provides you with the advantage to sell the underlying stock without actually owning it beforehand. Essentially giving you the opportunity to speculate that the price of a stock will go down and make a profit if your assessment is indeed correct.
The only thing you actually need to get started is a forex trading account with a reliable broker and a trading platform which will serve as your charting software where you can monitor the market’s performance as well as execute your trades.
Benefits to consider
Trading stocks is a proven approach towards growing your wealth. Trading shares online through a brokerage also provides you with additional benefits such as getting exposure to thousands of global brands including Amazon, Apple, Google, and Facebook. Major indices that track a basket of stocks in various industries are also available to be traded and these include the S&P 500, Nasdaq and Dow Jones among others.
Moreover, you can find earnings reports from major companies that are made available publicly and use them to inform your trading strategy and adjust your trading portfolio.
If you trade stock online through a brokerage, you also get better pricing for your trades with lower initial deposit requirements as well as access to powerful leverage that can be used to increase your buying power and profits.
Trading on margin or using leverage on your trades involve borrowed capital from your broker for the purpose of making the most of your balance. Leverage can be used to open larger positions, but you should keep in mind that it also exposes you to further downside risk in case the market doesn’t go in the direction you predicted.
Stock trading platforms
Different brokers across the world have their own unique offering of trading platforms and software solutions for clients. Thankfully, however, MetaTrader 4 (MT4) – the most popular platform in forex – is made available from the majority of brokers and can be used to trade not only stocks and indices but other financial markets as well including currency pairs, cryptocurrencies, and commodities.
The MT4 charting capabilities allow you to monitor the price of a stock in real-time as well as look at its past performance. Depending on their trading strategy, stock traders will look at a stock’s performance over the short term or long term and look to buy or sell accordingly. As a stock trading software, the MT4 offers a robust trading experience with a variety of tools and features to help you conduct your market analysis.
If you are aiming to profit from the short-term movements of a stock’s price, you need to monitor the platform around the clock in order to be able to open a trade as soon as a favorable entry becomes available. Therefore, most stock traders will download the mobile version of the MT4 platform on their Android or iOS device in order to be in a position to access their account and charts and open trades at a moment’s notice.
Thankfully, the MT4 mobile app is available for free and you can use it to trade stocks in the same way you would on the desktop version of the platform. This way, you can trade on the go as long as you have your phone with you and an active internet connection.