ForexTB Stocks Trading: Pros and Cons
Financial markets became more accessible recently thanks to innovations in technology and the development of different speculative products based on a wide variety of asset classes. Several decades ago, the entry threshold to enter the financial markets was much higher than nowadays. The growth of the margin trading market led to a highly competitive environment in the industry. As a result, individual traders started taking advantage of more attractive trading conditions, a wider range of financial instruments, and vast opportunities to get profits from online trading.
The list of asset classes available for online trading with ForexTB includes fiat currency pairs and cryptocurrencies, metals and other commodities, stock indices, and individual shares of companies. Although ForexTB stock trading implies several distinctive features, this asset class gains more popularity thanks to a wide choice of companies, potentially high return on investment, and sustainable liquidity.
What is a stock?
A type of securities that represent partial ownership of a company is called stocks or equities. Companies need to go through a process of Initial Public Offer (IPO) to get their shares trading on exchanges. In this way, companies attract investors by offering them a share in the ownership and thus potential profits in the future. Generally, owners of physical shares are aimed at getting periodic payouts in the form of dividends that the company earns. Besides, factors are driving the price of equities.
What drives the market price of a stock?
ForextTB stocks traders can benefit from the change in the price of these assets.
First of all, the price of a stock depends on the key rule of the market in terms of the demand-to-supply ratio. If the overall number of investors interested in purchasing a company’s shares exceeds the number of sellers, then the price rises. On the contrary, if the number of people owning stocks and wishing to terminate the investment by selling equities gets higher than the overall demand for them, then the market price of shares will decrease.
There are also several factors impacting the investment attractiveness of stocks such as profitability of the business, growth potential, competitive advantages, and so on.
Besides dividends, investors might be interested in long-term growth opportunities of companies in the scope of buying shares at a low price and reselling them at a higher price in the future.
What is a stock index?
A stock index is the overall cost of all shares of companies traded on this particular exchange. For example, The Dow Jones Industrial Average (DJIA) index is represented by the combined price of stocks of 30 companies traded on the New York Stock Exchange. Traditionally, stock indices reflect economic health as it has a direct correlation with periods of growth and turmoil.
What is a CFD?
CFD stands for Contract For Difference. This is a derivative or speculative product designed to simplify trading. The key feature of CFDs is that traders can buy or sell underlying assets without owning them. This is exactly what ForexTB stocks trading is about.
For example, if you predict that the price of Apple will rise soon, and you want to buy it to resell when the price gets higher. Trading CFDs extends the options for short-term profits and simplifies the life of a speculator.
What is margin speculative trading?
Thanks to the high liquidity of some financial instruments, institutional banks and brokers in the financial markets are ready to provide their funds in the form of leverage, allowing traders to cover only partial cost of the asset they are willing to trade on. As a result, traders have to provide only the margin in prices so that in a worst-case scenario, liquidity providers won’t get losses. But if the price of the underlying asset goes in the right direction, then it will be a win-win situation as brokers earn their commissions for providing access to the financial markets for traders. Margin trading lowers the entry threshold and helps trading strategies become more flexible.
Pros and cons of ForexTB stock trading
ForexTB stocks trading offers attractive conditions for retail customers. First of all, it’s about the choice of companies. The broker has several unique brands on the list of stock CFDs. For example, Netflix shares show good performance thanks to the popularity of the company, while Moderna shares have a high growth potential thanks to the recent achievements in the pharmaceutical sector.
Besides, ForexTB stocks include such tech giants as Facebook, Amazon, Tesla, and Alphabet (Google) that had a lucrative performance last year despite the global economic crisis.
Traders can get access to the global stocks market as ForexTB operates with equities on major exchanges including The New York Stock Exchange, London Stock Exchange, and The Tokyo Stock Exchange.
In favorable market conditions, stocks can show profitable price action, delivering a double-digit growth in one single day during rallies. On the other hand, when the equity market struggles from turmoil or concerns of investors, the option of short-selling gives traders an opportunity to make money on sell-offs. Flexible leverage helps traders impose diversification in order to mitigate possible risks and enlarge the number of equities in their portfolios.
When it comes to the disadvantages of trading ForexTB stocks, it’s worth highlighting comparatively high spreads (in contrast to major currency pairs, for example). High volatility of the asset class might be a double-edged sword as it could lead to potentially deep drawdowns, so traders should remember the risk management rules when trading equities.
Additional advantages of the ForexTB brokerage.
ForexTB ensures fast connection and order execution in the reliable MetaTrader 4 trading platform represented in both desktop and web-based versions. Traders get a high level of protection from financial authorities as the broker is regulated by CySEC, having all of the appropriate licenses to provide financial services for its clients. News and analysis app delivered by Trading Central Labs helps traders hold the hand on the market pulse, find trending assets and make profitable trading decisions.
