Stocks Trading - Advantages and Disadvantages
What is Stocks Trading?
Companies throughout the world issue new stock shares every day. They do so to raise capital in order to invest in the business. Once stock shares have been issued the public is free to buy and sell those issues through a stock broker. As the supply and demand for the shares changes so too does the price. Changing stock prices means opportunities to profit for a trader.
With the arrival of the internet it is now possible to buy and sell stocks relatively cheaply and almost instantly. This, coupled with increased volatility has given rise to more and more people trading stocks rather than just buying and holding them for years.
Advantages of Stocks Trading
Better returns. Actively trading stocks can produce better overall returns than simply buying and holding.
Huge Choice. There are thousands of stocks listed on markets in the US (such as the New York Stock Exchange and Nasdaq) and around the world. There is always a stock whose price is moving - it's just a matter of finding them.
Familiarity. The most traded stocks are in the largest companies that most of us have heard of and understand - Microsoft, IBM, Cisco etc.
Disadvantages of Stocks Trading
Leverage. With a margined account the maximum amount of leverage available for stock trading is usually 4:1. Meaning a $25,000 could trade up to $100,000 of stock. This is pretty low compared to forex trading or futures trading.
Pattern Day Trader Rules. Requires at least $25,000 to be held in a trading account if the trader completes more than 4 trades in a 5 day period. No such rule applies to forex trading or futures trading.
Uptick Rule on Short Selling. A trader must wait until a stock price ticks up before they can short sell it. Again there are no such rules in forex trading or futures trading where going short is as easy as going long.
Need to Borrow Stock to Short. Stocks are physical commodities and if a trader wishes to go short then the broker must have arrangements in place to 'borrow' that stock from a shareholder until the trader closes their position. This limits the opportunities available for short selling. Contrast this to futures trading where selling is as easy as buying.
Costs. Although online trading costs for stock trading are low they still add considerably to the costs of daytrading. Online futures trading is about 1/4 of the cost for the equivalent value. In the UK 0.5% stamp duty is also levied on all share purchases making trading virtually impossible - Hence the popularity of spreadbetting.
Tim Wreford runs Online Futures Trading, a website that provides information and resources for traders. Tim also provides a free day trading system, the results of which are updated daily on the site.
Welcome to the World of Currency Trading
Indeed large multinational and individual banks and other major financial institutions have dominated FX trading (also known as Forex trading), but there is a paradigm change in the nature and type of investing. According to one estimate, in the new millennium, there are over 6 million online investment accounts, up from 1.5 million in 1997. As a result, start-up firms now compete directly with financial institutions to serve investors in the new technologically driven economy, and the clear winner is the customer. The competition between the brick and mortar institutions and the Internet-based companies has dramatically lowered the costs of investing, and empowered the individual investor to take control of their own investment strategy in Forex trading.
The Margin Advantages of Trading FOREX.
There is one aspect that is considered as one of the best advantages of FOREX Trading. This is related to the amount of money you need to place a trade, this is known as "margin", and in short, this is all that can be lost in a the case you had a bad trade.
Adaptation to the Realities of the Market
Do you think adaptation to the realities of the market is the most important thing?
The Miracle of Forex
My father, who owns a small parts store and garage for vintage British sports cars, called me up recently and droned on and on about how he is getting killed by the Euro. Confused as to how the Euro could possibly be affecting his small and seemingly insignificant business, I asked him how. "Because of the Euro!"
A Look at Forex Market Makers
The investor in the currency market takes for granted that a pair of currencies can be bought or sold at a moment's notice. Once an order is placed with a broker, the trade is executed within seconds. It is, of course, not as easy as that.
A broker is any person or firm that charges a fee in exchange for executing trades for a trader. A Forex broker does not charge a commission for placing a buy or a sell order the way a real estate broker would charge a percentage fee of the total price of a sale. A Forex broker is paid according to the spread ? or the difference between the trader's bid for a currency, and the seller's asking price for that currency. Usually this spread is less than 0.1% or ten pips. (Pips are the smallest movement a currency can make on the Forex. Pips are commonly called referred to as points.) The lower the spread, the less a trader pays a Forex broker for a trade.
Money Management, Part 2
Money Management, Part 1
There are some common mistakes I've seen traders make in the area of money management. First, let's understand what money management is all about.
Forex Trading Can Be Like Day-trading
Forex trading, or foreign currency trading, has become a bit of a craze of late, especially since it is something available to anyone who owns a computer. And anyone who is willing to put in some training time can profit from forex trading.
Forex Training: Follow Your Gut or Your Broker
Which way will the forex market move? Do you just follow your gut feeling? Or do you have Neo's sixth sense that would let you be one with the market and feel the underlying currents.
Forex Signal, Forex Signals Advice
There are lot's of Forex signals providers out there. New Forex traders might be thinking of looking for a reliable Forex signals provider. Is there any reliable Forex signals providers available?
The following situation happens quite often to many traders. Look it over and see if it has been happening to you:
Writing A Trading Plan
All professional traders have a trading plan. Trading futures is a zero sum game and those with a plan (and the discipline to apply it) will succeed over those that have no plan. A plan details the particular market anomaly that you intend to exploit - your edge. Human emotion creates anomalies - essentially, the fear and the greed of those that have no trading plan.
Discovering Turnaround Candidates
There are many types of investment methodology out there. All of them has their own merits. I for one, personally like to invest in turnaround stocks. What is turnaround stocks? They are normally companies that are experiencing problems (hopefully short-term), and a lot of people are not willing to wait for those companies to recover.
The Forex Market-What, When and Why?
An Evaluation of the Devaluation
A Minister of Finance is morally right to lie about a forthcoming devaluation and a woman has the right to lie about her age. This is the common wisdom.
The Meaning of FOREX Price Charts and How to Use Them
There is one very important factor that you should consider with great care if you are willing to become a successful, profitable Forex trader. This ever important factor that must be always present in the trader's portfolio, is the ability to read the charts.
Financial Crises, Global Capital Flows and the International Financial Architecture
The recent upheavals in the world financial markets were quelled by the immediate intervention of both international financial institutions such as the IMF and of domestic ones in the developed countries, such as the Federal Reserve in the USA. The danger seems to have passed, though recent tremors in South Korea, Brazil and Taiwan do not augur well. We may face yet another crisis of the same or a larger magnitude momentarily.
Assessing the Opportunities Presented by the New Iraqi Currency
Could it be possible that you are staring right into the most spectacular financial opportunity of the century? Operation: Iraqi Freedom will undoubtedly be a war marked in history for loss and tragedy, American victory, and the rise of a nation with a new democratic government. But could it also be a war historically remembered for the financial opportunity it created for the sharp investors who keenly recognized an ephemeral chance at the right time?
Forex Made Easy for Everyone
Forex made easy is as simple as you would want it to be. The foreign exchange market is a worldwide market and according to some estimates is almost as big as thirty times the turnover of the US Equity markets. That is some figure to chew on. Forex is the commonly used term for foreign exchange. As a person who wants to invest in the forex market, one should understand the basics of how this currency market operates. Forex can be made easier for beginners to understand it and here's how.
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