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Did you know that the global stock market capitalisation rose to a record $95 trillion in November 2020? This was despite the historic crash in March of the same year. The growth has continued since then, with the total market cap estimated at $122 trillion by November 2021. But it is one of many markets that has suffered from ongoing volatility – it had dropped to $89.92trillion by the end of September this year.
Stock markets are seen as an exciting arena by many, given the constant changes in share prices. This volatility brings multiple trading opportunities. Thinking of trading stocks such as Meta, Amazon, Tesla, Pfizer or Twitter? Here’s a simple introduction to get you started.
In 2022, the fastest growing stock market sectors have been 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, especially if traded on major exchanges. This means you’ll usually be able to find someone to accept your trade.
Some stocks also pay dividends. So, if you own the shares of a dividend-paying company on the ex-div date, you might 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. The owners of such stocks are the first to receive dividends, taking precedence over claims to dividends on common stocks. Any listed company could offer one or both kinds of stocks.
The 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 may 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 may 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.
News releases, such as the announcement of a dividend, a new product launch or recall of a product, and landing a big contract, can all impact the share price. In addition, companies release their financial numbers, such as earnings, revenue and EBITDA, each quarter. If the numbers beat market expectations, the share price tends to rise, and vice versa.
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 in 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 ADSS’s MT4 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 events.
Risk management is indispensable in any sort of trading or investing. Stop loss is one 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 educational resources, consider the opportunities of copy trading, connect with experienced traders and continue to refine your trading strategies. You can also keep an eye on market moves with the ADSS economic calendar, which you can find at the link above.
Open a live account with ADSS and gain access to global equities and other assets, all from a single place.
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 (“ADSS”) is authorised and regulated by the Securities and Commodities Authority (“SCA”) in the United Arab Emirates as a trading broker for Over the Counter (“OTC”) Derivatives contracts and foreign exchange spot markets. ADSS is a limited liability 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.
The information presented is not directed at residents of any particular country outside the United Arab Emirates and is not intended for distribution to, or use by, any person in any country where the distribution or use is contrary to local law or regulation.
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.
