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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.
iFinix Corp. 2010 Outlook CNNMoney.com (press release) Mr. Dank has over 20 years experience in the securities industry, having held senior management positions with futures trading firms, currency trading firms ...
Peso surges further to 45.65 Manila Standard Today The peso surged to 45.65 against the dollar at the close of currency trading Wednesday, boosted by dollar inflows and renewed ...
Goldman: More Upside, Says FBR Capital Barron's (blog) That's because Goldman's fixed income, commodities, and currency trading can yield 15% to 20% return on equity and return on assets, even with reduced ...
RELATED ARTICLESNew Opportunities with Forex Trading
The simplest definition of currency trading is the practice
of exchanging one country's currency for another country's
currency. Basically, currency trading involves four main
variables: currencies, exchange rate, time, and interest
rate.
Forex Currency Trading
It is possible to buy and sell money from different
countries on the foreign exchange market called Forex.
Forex currency traders can profit by taking advantage of
the dips and swells in the foreign currency market.
Example of a Profitable Transaction in FOREX
To make a profit, in the FOREX, a trader can enter the
market as a *buy position* (known as going "long") or a
*sell position*(known as going "short"). For discussion,
let's assume you've been studying the EURO.
Forex2u Forex Strategy On Successful Forex Trading
The essence of the FX2u Forex strategy is that it does not
have any Forex trading system but could forecast the market
trend accurately. Every set of Forex trading system
available has its disadvantages.
Where to Get Forex Training
For those of you who are interested in forex trading, you
may want to start off by getting some good forex training.
Forex training is a necessity for anyone with this
interest.
Chinas New Currency Regime
The base unit for the renminbi is the yuan, which is how
the Chinese currency is most commonly referred to. The
official ISO abbreviation for the yuan is CNY, but it is
also commonly abbreviated in the forex industry as RMB.
Online Stock Trading: Freedom of Trade
I remember the first time I started to trade online. It was
just before the tech bubble of the late 1990's and the
internet was still something new for most people.
The Major Players in the Foreign Currency Exchange Market - FOREX
Since the US dollar is the centerpiece of the market, it is
normally considered the 'base' currency for quotes. In the
"Majors", this includes USD/JPY, USD/CHF and USD/CAD.
Factors Influencing a Currency Pair Exchange Rate
IntroductionThe exchange rate refers to the value of the US
dollar against the values of currencies of other countries.
Such a rate helps determine how much we pay for imported
goods and services and how much we receive for what we
export, among other things.
Commodity Trading - Advantages and Disadvantages
What Is Commodity Trading? Commodity futures markets allow
commercial producers and commercial consumers to offset the
risk of adverse future price movements in the commodities
that they are selling or buying. In order to work a futures
contract must be standardized.
Psychology Of Trading
The psychological aspect of trading is usually
underestimated by those new to trading. The psychological
problem for most traders is the fear of losing - ironically
it is this fear that causes most traders to lose money in
the long run.
Momentum Trading: A Practical Day Trading Strategy to Get Profits from Hot Stocks
Momentum day trading can be extremely profitable when done
correctly..
Where is the Market Going?
If you ask me whether the market will have moved up or down
by this time next year, well I may as well flip a coin,
because I don't know. If you ask me whether the market will
have moved up or down by this time next month, well again,
I may as well flip a coin, because I still don't know.
What is Forex Trading?
Forex, or Foreign Exchange, is the simultaneous exchange of one country's currency for that of another. The way it works
is an investor who wishes to purchase or sell one currency for another with the hope of making a profit when the value of the currencies change in favor of the investor.
The Seven Most Traded Currencies in FOREX.
Currencies are traded in dollar amounts called "lots". One
lot is equal to $1,000, which controls $100,000 in
currency.
Learn Forex Trading - a Guide for Beginners
One can learn forex trading as easily as one would like to
learn other subjects or train in other professions. The
criteria for learning forex trading is an analytical /
logical bent of mind and some number crunching abilities.
How Do Other Countries Devalue Their Currencies?
Countries devalue their currencies only when they have no
other way to correct past economic mistakes - whether their
own or mistakes committed by their predecessors. The ills of
a devaluation are still at least equal to its advantages.
Trading Profitably on the Foreign Exchange Market
You may be asking yourself "how does one begin to trade
profitably as a currency trader?". First, it is important to
closely monitor foreign equity markets to attempt to
predict or model how their respective currencies will
perform against other currencies, ideally, currencies that
are not very closely related, nor proportional, to the
former currency.
Choosing A Forex Broker
With currency trading becoming ever more popular, the
number of brokers is growing at a rapid rate. What should
one look at when deciding which broker to open an account
with? These are the important points to consider.
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.
MORE RESOURCES updated Thu. March / 11 / 2010
