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Mastercard’s shares decline despite upbeat results
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Tesla’s stock surges after upbeat Q4 print
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Is there a golden opportunity with Shopify?
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Investors unimpressed by Microsoft’s earnings beat
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How should you play the NASDAQ 100’s moment of truth?
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Baker Hughes shares decline amid weak Q4 print
Trends & Analysis
News
Mastercard’s shares decline despite upbeat results
News
Tesla’s stock surges after upbeat Q4 print
News
Is there a golden opportunity with Shopify?
News
Investors unimpressed by Microsoft’s earnings beat
News
How should you play the NASDAQ 100’s moment of truth?
News
Baker Hughes shares decline amid weak Q4 print

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07. Apple? Tesla? Meta? How to start trading stocks

Disclaimer: This article is an educational guide to CFD trading and the financial markets and should not be considered as advice. Trading CFDs is high risk. Always ensure you understand the potential risks and rewards associated with trading before you trade.

 

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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.

 

Did you know?

In 2022, the fastest growing stock market sectors have been Energy, Healthcare, and Technology.

 

Why Trade Stocks?

 

Flexibility

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.

 

Diversification

Adding equities to your portfolio is a good diversification method since the stock markets move independently of most other asset classes.

 

Liquidity

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.

 

Dividends

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.

 

Did you know?

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 Four Types of Stocks Every Trader Needs to Know About

 

The broad categories of shares on a stock market are:

 

1. Growth Stocks

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.

 

2. Dividend Stocks

These are stocks that offer regular dividend payouts to shareholders, which is a specific percentage of the earnings of the company.

 

3. New Issues

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.

 

4. Defensive Stocks

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.

 

Did you know?

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!

 

 

What Moves the Stock Markets?

 

Every market is influenced by demand and supply, and so is the stock market. But multiple other factors also impact stock prices.

 

Company Performance and News

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.

 

Sector Performance

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.

 

Macro-Economic Trends

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:

  • Interest rate decisions by the country’s central bank
  • Inflation and deflation
  • GDP numbers
  • Unemployment rate
  • Trade wars
  • Natural or man-made disasters.

 

Market Sentiment

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.

 

Stock Trading Tips Before You Dive In

 

Learn Fundamental and Technical Analysis

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.

 

Use Risk Management Measures

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.

 

Learn All You Can

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.

Key Takeaways

  • The volatility of the stock markets brings trading opportunities, but also brings risks.
  • There are different types of stocks. Choose stocks based on your trading goals and style.
  • Multiple factors influence stock prices. Familiarise yourself with technical and fundamental analysis tools.
  • Due diligence and risk management is key to succeed in stock trading.

 

Open a live account with ADSS and gain access to global equities and other assets, all from a single place.

Learn. Explore. Pursue more.

 

Join our trading community to access our free weekly webinars, and our library of tutorial videos and how-to guides. Designed to help you navigate the index, forex, equities, cryptocurrency and commodities markets, analyse the latest news and insights and become a better trader.

 

01. The Difference between Technical and Fundamental Analysis

 

Technical and fundamental analysis are the foundations of informed trading. Here’s what you need to know about them.

02. The Beginner’s Guide to Charts in Trading
 

Charts are an excellent way to gain insight into the markets at a single glance. They are powerful tools for online trading.

03. Things to know before placing a trade on MT4
 

Ready to start your trading journey with our bespoke version of the award-winning platform?

04. How does CFD trading actually work?
 

Why is CFD trading so popular? Learn how to use Contracts for Difference for trading equities, FX and more.

05. What are Indices and How Do You Trade Them?
 

Not sure what stocks to trade? Start with an index such as the Dax instead and trade a variety of them at the same time.

06. The basics of FX: six things to know when you start
 

Want to trade CFDs on forex pairs? Not sure where to start? Check out our beginner’s guide.

07. Apple? Tesla? Meta? How to start trading stocks
 

Want to know how to trade equities? Check out our simple guide on trading CFDs on some of the biggest companies in the world.

08. The Beginner’s Guide to Trading Commodities
 

Interested in trading gold, oil, silver and more? Learn about safe haven assets and more with our guide.

09. Four Things to Consider Before You Begin Crypto Trading
 

Planning on adding cryptos to your portfolio? Here’s our guide to navigating those notoriously volatile digital coins.

10. The Ultimate Trading Checklist: Pro tips to save you time
 

Ready to start trading? Learn about investing responsibly with our comprehensive guide.


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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 (“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.