For investors, the stock markets represent a veritable mine of opportunities of all kinds. This is done through stock trading. The latter is not difficult and is accessible to everyone, beginners or advanced in the field. However, it is important to know a minimum on the subject. We provide an update on stock trading in this dossier.
Definition and principle of stock trading
Stocks to be bought are now a common financial tool in the market. When you buy a stock, you are buying a portion of a publicly traded company. It is this stock transaction that we call stock trading. When trading, you must therefore analyze the company and its long-term profitability via different indices: stock prices, financial performance of the sector, quarterly results, etc.
When trading stocks, you can buy the securities directly on the stock exchange or trade in derivatives of the asset. Reliable stock trading can be done on platforms like Sax. The latter is a leader in the financial technology market. It works to bring together traders, investors and market partners in CFDs, forex, options, stocks, futures and other assets through a single account.
The best times to trade stocks
In the field of stock markets, fixed trading hours exist. They depend on the stock exchange on which the share is listed. For the London Stock Exchange, for example, the schedule is 8:15 a.m. to 4:30 p.m. GMT, Monday to Friday. It should be remembered that the London Stock Exchange does not close between noon and two, but the majority of Asian stock markets do not open at lunchtime.
You should also know that most stock exchanges only open Monday to Friday apart from the Middle East stock exchanges which operate from Sunday to Thursday. Outside of these fixed times, you can still place an order on a trade, but you must have enough cash to activate it as financial intermediaries are not yet operational.
Know how to trade stocks
When trading stocks, you have two options: traditional stock trading and automatic trading of CFDs on stocks.
- Traditional stock trading involves buying real stocks of companies on stock markets where they are. You then buy a share of the company with a view to taking a stake. This is a long term approach to profit trading.
- Automatic trading of CFDs on stocks involves trading a contract for difference on a given stock. Without having to own the underlying asset, you can speculate on its price difference. The CFD is a derivative product in which the broker pays the investor the difference between the opening value and the closing value of a security. This is a short term approach.
Benefits of trading CFDs on stocks
Trading stocks using CFDs has certain advantages:
- The possibility of margin trading, meaning that the trader only uses part of the value of his trade and borrows the rest of the required capital from his online broker. This amplifies the results while allowing access to more substantial trade, although exposure to risk also increases.
- Using CFDs as a hedge for existing holdings, meaning that you have the option of selling your existing stocks short to avoid a downturn in the trading market.
- Short selling, which means you only get profit from your purchased stocks if the market is going up.