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Need an easy way to understand all about trading equities? Then this simplest guide to stock trading is meant just for you!
The Magnificent Seven (Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta Platforms and Tesla) were among the most sought-after stocks in 2023. Is the story different in 2024? Looking at Apple and Tesla, the Magnificent Seven might just turn into the Fabulous Five!
Apple reported disappointing Q1 2024 numbers, with iPhone sales down 10% and revenue declining 4% YoY. While the stock hasn’t really slumped YTD, its P/E ratio of about 26 means the stock is trading below its five-year average. This could give an opportunity for investors to buy the dip. Tesla, on the other hand, is down over 27% YTD, as of May 2024, and recent news has done nothing to improve the stock’s performance. The company reported its Q1 results, with profit down 55% YoY and revenue dipping 9%. Sales also declined in Q1, down 8.5% from a year earlier. Plus, Tesla has announced plans to lay off over 10% of its employees worldwide, which amounts to 14,000 people. This does nothing to bolster faith in the stock.
The silver lining, however, is Meta Platforms, which is up almost 31% YTD, as of May 2024. Yet, the P/E ratio makes it the best value stock among the Magnificent Seven.
The stock markets might seem like an exciting arena, given the constant changes in share prices, which brings multiple trading opportunities. If you too have been thinking about participating in this financial market, the first step is to learn all you can about it to maximise chances of success and minimize your risk. Here’s a simple introduction to get you started.
In 2022, the fastest growing stock market sectors were Energy, Healthcare, and Technology.
Stock trading offers the flexibility of trading with small or big lots. This lets you decide the funds you want to allocate to the equity portion of your trading portfolio.
Adding equities to your portfolio is a good diversification method, since the stock markets move independently of most other asset classes.
The stock markets are known to be liquid markets, meaning that you are likely to find a counterparty to your trade whenever you need one.
Some stocks also pay dividends. So, if you own the shares of a dividend-paying company on the ex-div date, you could potentially even earn some passive income.
Common stocks give the owner the right to vote for company decisions, but most shareholders trust the management and rarely exercise this right. Stocks without voting rights are called preferred stocks. They make the owner a receiver of preferred dividends and the first to receive refunds if the company liquidates or goes bankrupt. Any listed company could offer one or both kinds of stocks.
The 4 broad categories of shares on a stock market are:
These stocks are purchased with long-term growth in mind. These are shares of companies that are expected to grow at a rate that is higher than the market average and, hence, generate positive cash flows for the shareholder.
These are stocks that offer regular dividend payouts to shareholders, which is a specific percentage of the earnings of the company.
When companies list themselves on a stock exchange, they hold an Initial Public Offering (IPO). They sell a portion of the total shares in the company to the public via the IPO to generate funds for the business. This could be a good time to buy the stock, since it tends to be cheaper. But investing in IPOs requires higher due diligence to gauge the performance parametres and judge the growth potential of the business.
These are usually stocks belonging to companies in the consumer staples sector. Being non-cyclical, they are not highly impacted even by strong economic trends. They do not see very dramatic fluctuations and rise slowly. So, if you’re looking for a long-term investment, defensive stocks could be a good choice.
The most expensive stock in the world is Warren Buffet’s company, Berkshire Hathaway Inc. It has never had a stock split and has given out dividends only once since it was listed!
Every market is influenced by demand and supply, and so is the stock market. But multiple other factors also impact stock prices.
You might have noticed how tech or energy stocks tend to rise in tandem. This is because the market conditions in a sector will impact all companies operating in that segment. Of course, there can also be times when one stock benefits from bad news about a competitor company.
You might have noticed that most tech stocks rose during the pandemic, or many energy stocks stage an uptrend with a rise in oil prices. This is because the market conditions in a sector will impact all companies operating in that segment. Of course, there can also be times when one stock benefits from bad news about a competitor company.
The state of a nation’s economy plays a key role in a company’s performance because it influences the consumer’s purchasing power and sentiment. Major economic news that equity traders should keep their eye on are:
Have you heard the terms “bull market” and “bear market”? They are associated with overall investor sentiment. When investors are optimistic about a particular stock or company, its share price tends to rise. So, the general direction of the stock market depends to a large degree on the overall market sentiment.
Trading stocks requires making decisions based on the cumulative effects of various factors. This is where tools for technical and fundamental analysis are incredibly useful.
Popular trading platforms like MT4 and the ADSS platform offer powerful analytic tools and technical indicators. They are easy to use and understand. An economic calendar is a good way to keep track of economic factors.
Risk management is indispensable. Stop loss is an effective risk management measure. Here, you set a pre-determined price level at which your position will get automatically closed. This helps limit losses if the market suddenly moves against your position. Take profit works in the same way, closing a position to lock in profits before the trend reverses.
Successful traders say that they continue learning throughout their trading journey. So, check for rich educational resources, opportunities to copy trade, connect with experienced traders and continue to refine your trading strategies.
Open a live account with ADSS and gain access to global equities and other assets, all from a single place.
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Investing in CFDs involves a high degree of risk that you will lose your money due to the use of leverage, particularly in fast moving markets, where a relatively small movement in the price can lead to a proportionately larger movement in the value of your investment. This can result in loses that exceed the funds in your account. You should consider whether you understand how CFDs work and you should seek independent advice if necessary.
ADS Securities LLC – S.P.C (“ADSS”) is authorised and regulated by the Securities and Commodities Authority (“SCA”) in the United Arab Emirates under First Category: Dealing in Securities and Fifth category: Arrangement and advice (Introduction). ADSS is a Limited Liability Company – Sole Proprietorship Company incorporated under United Arab Emirates law. The company is registered with the Department of Economic Development of Abu Dhabi (No. 1190047) and has its principal place of business at 8th Floor, CI Tower, Corniche Road, P.O. Box 93894, Abu Dhabi, United Arab Emirates.
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ADSS is an execution only service provider and does not provide advice. ADSS may publish general market commentary from time to time. Where it does, the material published does not constitute advice, or a solicitation, or a recommendation to a transaction in any financial instrument. ADSS accepts no responsibility for any use of the content presented and any consequences of that use. No representation or warranty is given as to the completeness of this information. Anyone acting on the information provided does so at their own risk.
