HFM information and reviews
HFM
96%
FXCC information and reviews
FXCC
92%
FxPro information and reviews
FxPro
89%
FBS information and reviews
FBS
88%
Vantage information and reviews
Vantage
85%
MultiBank Group information and reviews
MultiBank Group
84%

Choosing a trading instrument: how to trade stocks and CFDs on stocks


Stocks are traded on the stock market. The largest stocks exchanges are London Stock Exchange, NYSE, Amex etc. Stocks trading is popular with traders due to its variety of asset choices, transparency of transactions, high asset volatility, predictability, and relatively low levels of risk.

What is CFDs on stocks

If you think that you don't have enough experience and initial deposit to start trading stocks on stock exchanges, there is a less expensive alternative then. CFD (Contract for Difference) is an OTC financial derivative that allows you to profit from changes in prices for various financial assets, be it indices, cryptocurrency, stocks, etc. The movement dynamics of the contract value for price difference completely coincides with the dynamics of the price movement of the underlying assets themselves.

CFDs are traded in the Forex - the most convenient and accessible platform for a novice trader. CFDs avoid all the disadvantages of trading stocks in the stock exchange. Their main advantage is that you can start trading even with 10 dollars in your pocket. Of course, there is nothing to do on the stock market with such a sum. Likely, you will not even be able to open an account with a broker that provides access to such markets.

Using CFDs you don't need to look for a profitable buy/sell offer every time. Trades are executed strictly at the price that you see at a given time on the chart. Any asset, in any quantity, any time of the day. Low margin rates are also considered one of the main advantages of CFD trading. For example, a full-fledged Bitcoin costs $50,000. In order to purchase a full Bitcoin CFD on your account, you only need to have 20% of its value as collateral. Expensive stocks, expensive assets, cryptocurrencies - everything becomes more affordable with CFDs.

Investors vs Traders

The main market participants can be roughly divided into two types: traders and investors. Investors buy stocks for the long term, hoping to profit from their growth in the future. Small price fluctuations inherent in any market don't really matter to investors. Investing is a long but almost win-win game because "the market is growing." Of course, there are crises and recessions, but in general, stocks grow steadily as the world economy grows. If you have enough money and patience, investing in stocks of large stable companies is your option. If you have a free deposit, investing can be a good passive source of income that doesn't require constant data tracking.

Investors, in turn, can also be divided into several categories: long-term (make investments for a period of more than several years), medium-term (from several months to a year) and short-term (up to several weeks).

Traders, on the other hand, act risky and fast. Only profit here and now is important for them. The chef trader's assistant is technical analysis. The market is difficult to predict in short periods, and even small price fluctuations can bring you both large profits and large losses. Trading is suitable for those with free time and a keen interest in finance. Traders need a constant active presence in the trading terminal, analysis of price movements and world news. Traders can be categorized based on the nature of their transactions:

Stock trading strategies

No matter which trading style you choose depending on your goals, interests and deposit size, for sure you will need an effective trading strategy anyway. There are a lot of strategies for trading stocks. In order not to get lost in such a variety, we suggest that you first use proven tactics that have long proven their effectiveness.

Trend is your friend

You need to start analyzing any asset from the determination of the trend and its boundaries. The basic rules of technical analysis state that the existing trend will continue rather than change. An excellent example of an uptrend is blue-chip companies courses. These are stable, successful companies whose products you often use.

The above Amazon (AMZN) chart clearly shows a multi-year uptrend driven by a number of fundamental factors. The investor drew trend lines through the minimum points, having received the Support Line. The second line was drawn through the highs, which is the Resistance Line. Having thus received a trend channel, the investor drew internal lines through the points of reversals and corrections. It is not difficult to define them even for a novice trader. A trader can easily get entry and exit points from deals, having received a trend channel with correction lines. And of course, you should never trade AGAINST the trend. In this example, it would be profitable to open only buy orders.

Flat

It sometimes happens that in the short/mid-term it is impossible to identify a strongly marked movement. After all, support and resistance levels can be not only trendsetters. They can indicate the boundaries making the price of an asset changes.

The trader identifies local highs and lows as well as the points where the price often changes direction and gets a multilevel flat. The trading strategy, in this case, is to buy when prices rebound from the levels below and sell when prices rebound from the levels from above. You can try to conclude deals at intermediate values, but you can work only at the max and min levels, making more serious deals.

Now you already know how to trade currency pairs, cryptocurrencies and stocks. In the following articles in this series, we’ll talk about other popular instruments so that you can make your own decision and choose the suitable assets for your trading.


RELATED

IronFX: Leverage in Forex. Complete Guide

Leverage is simply borrowed funds that traders use to trade. In other words, it refers to the ability that traders have when opening an account with a forex broker...

How to start trading in Forex for free: first steps

A simple web search query "how to trade in Forex" will yield dozens of on-site and online classes for beginners and traders of various experiences...

Everything you should know about mutual funds

A brief introduction to mutual funds and why you should invest in them, the risks, who should invest, their performance and the alternatives. Every year...

What is a Fan Token?

With the invention of social networking sites such as Facebook, Instagram, and YouTube, you can now engage and connect with famous people continuously. The cryptocurrency industry...

MetaTrader4 vs. MetaTrader5

A trading platform is basically a workspace for traders, their work environment. The quality of trading depends on its functionality and convenience. Many market...

What is Forex VPS and What Is It For

The trading conditions in which modern traders work have changed dramatically over the past 10-15 years. Today, a trader's computer and trading terminal are able to work miracles...

High-Frequency Trading (HFT) - Overview, Advantages, Risks

Everyone who is interested in financial markets, of course, knows about the existence of different trading methods. Some of them are quite popular, while not much is known about others...

Is MetaTrader 4 good for beginners?

MetaTrader 4 (MT4) is one of the world’s most popular trading platforms, suitable for all types of traders, regardless of expertise. MT4 has become wildly popular for many reasons...

How to Trade Oil CFDs: A Comprehensive Guide

The oil and gas industry encompasses different types of oil, such as crude oil, no-lead gasoline, natural gas, and heating oils. Among these, crude oil remains...

Dogecoin vs. Bitcoin: Which one is the Better Investment?

Dogecoin and Bitcoin are two well-known crypto assets. However, some traders may not know how to compare Dogecoin vs. Bitcoin, so knowing some of the significant similarities and differences...

Mastering the Art of CFD Trading: A Comprehensive Guide

Contracts for Difference (CFD) trading is rapidly evolving as one of the most sought-after instruments in the financial market. Its flexibility across various market sectors...

Selecting Signals in Copy Trading

A few simple tips on how to choose profitable signals for a subscription in Copy Trading, and not to lose your money. These recommendations are also suitable for PAMM accounts...

Dollar-Cost Averaging: The Strategic Method to Strengthen Your Portfolio

Imagine the routine process of fueling your car. If you consistently refuel your tank every week, you'll average out the cost when gas prices rise and fall throughout the year...

Four Ways to Use Your Red Envelope Money as a Trader

Lunar New Year is a major historical and cultural festival celebrated by millions of people around the world, particularly the Chinese, Vietnamese, and Korean communities...

Mastering the Art of Automated Trading: A Comprehensive Guide to Trading Robots

In the digital age, trading robots have revolutionized the financial markets, providing traders with a high-tech assistant to navigate the complex world of trading...

Bitcoin vs. Litecoin: What You Need to Know

Cryptocurrency can seem like a daunting concept. Over the past decade, interest in cryptocurrencies has increased exponentially. Bitcoin (BTC) has continued...

Unknown facts about the US dollar

The US dollar is the most popular currency in the world. About 90% of all financial operations are conducted with the US dollar on exchanges, and the rate of this...

Trending Stocks

Big tech, pharma, banks and other trending stocks are always a hot topic in the investment markets.Millions of investors flock to stocks like Apple or Amazon...

Unlocking Potential: A Comprehensive Exploration into Day Trading

In the fluid and ever-evolving universe of finance, day trading has surfaced as a pivotal activity for individuals desiring to traverse the bustling waves of the stock market...

Q2 2022 Earnings Season Explained

Earnings season is a few weeks when most public companies share their quarterly performance in their earnings reports. It takes place every three months...

XM information and reviews
XM
82%
FP Markets information and reviews
FP Markets
81%
FXTM information and reviews
FXTM
80%
AMarkets information and reviews
AMarkets
79%
Octa information and reviews
Octa
79%
BlackBull information and reviews
BlackBull
78%

© 2006-2025 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.