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Stocks are the ownership certificates (shares) of a company, issued by a business to raise capital for growth. Stock prices fluctuate depending on various factors.
You can trade stocks in two ways:
1. The traditional way to trade stocks is through buying and selling. The aim is to buy a stock and profit from a potential rise in its stock price by selling at the right time (and certainly before any decrease in price!). Buying a stock in this way gives you ownership of the stock, meaning you literally own a piece of the company. Pretty cool, huh?
2. You can also trade stock contract for differences (CFDs). CFDs involve trading on margin and speculating on price movements of a stock, whether that is upwards or downwards (in other words, going long or short).
Fun fact: Eurotrader offers ZERO commission on stocks!
STOCK MARKET EXPLAINED
TAKE STOCK
IN STOCKS
The Netherlands is known for a number of things: its canals, colourful tulips, traditional handmade wooden clogs, and the fact that the number of bicycles in the country surpasses the number of its residents.
What you probably don’t know – yet – about the Netherlands is that the first modern exchange was created in Amsterdam, the country’s capital, back in 1611.
Since then, almost every developed country has one or more stock exchanges, while more than 100k companies are traded publicly worldwide.
The stock market is where stocks are electronically bought and sold by individual and institutional investors through major stock indices.
As with many assets, supply and demand are one of the forces that move stock prices. Apart from fundamental factors, technical factors such as inflation, liquidity, trends, news or market sentiment may impact the stock prices. The impact of some of these factors is easier to quantify, while other factors cannot even be predicted.
Some other factors are specific to each stock and include the company’s financial health, innovation levels, price and valuation.
HOW TO TRADE STOCK CFDs
As attractive some company ownership might be, the upfront capital needed to buy stocks can present a financial barrier for many traders. That’s why we offer stock CFDs as a more accessible alternative, though it’s worth noting that CFD trading comes with its own risks.
Trading stock CFDs grants you access to the super stock markets. With CFDs, you will be trading against stock price movements of a company, but you’ll have no ownership of the underlying assets nor of the stocks themselves.
But then, why trade stock CFDs?
Well, it allows you to take positions on both bull and bear markets, adding even greater flexibility to your trading strategy. Also, it is a good way to diversify your portfolio.
Trading stock CFDs allows you to use leverage, meaning you only need to put down a fraction of the trade’s full value to open a position for one share. For example, at 5:1 leverage, you will only need 20% of the price of the share to open a position.
A trader may make or lose money by speculating on stocks over a shorter timeframe by focusing on technical patterns, using methods such as scalping and day trading. Traders can monitor the stock’s performance along with their entry and exit prices.
Contract for differences (CFDs) are trading contracts that allow the trader to speculate on the rise or fall of different stock prices and pay the difference between the asset value at the beginning and the end of the contract.
This is where traders profit from small price changes created by small market movements through a large number of trades. Scalpers predominantly open and close trade positions very quickly, and many companies consider scalping to be activity carried out within a 3-minute timeframe.
A trader buys and sells a financial asset within the same trading day before the market closes.
| Stocks | Stock CFDs | |
|---|---|---|
|
Trading Strategy |
Long-term |
Short-term |
|
Stock Ownership |
You own the asset |
You profit from its performance. You do not actually purchase the stock. |
|
Profit |
You only profit from price rises |
You can profit even from a falling market |
|
Commission |
You will be subject to broker fees |
At Eurotrader, we charge zero commission on stocks. You’re welcome! |
|
Extras |
You’ll receive shareholder privileges such as dividends |
You can leverage your capital and maximise your profits. Just be aware that you maximise your losses too. |
TRADING ON A BUDGET
FRACTIONAL
SHARES
Sometimes the price of the stock can be out of reach for an everyday investor. However, those looking to trade on a budget can take advantage of purchasing fractional shares instead, which function just like real shares.
A trader’s overall Profit & Loss will scale up in proportion to the value of the underlying share. Thus, they will be entitled to a fraction of the dividend that is offered on it.
Fractional trading offers the potential to build a balanced and diversified portfolio regardless of the stock price and budget limitation. Fractional shares are also ideal for risk management: portfolio diversification with a smaller budget can be achieved since a trader does not purchase full shares and can allocate the budget in multiple stocks.
You can trade fractional share CFDs
with Eurotrader. Sign up here to get started!
You can trade fractional share CFDs with Eurotrader. Sign up here to get started!
PLAN-PICK-PERCEPTION-PSYCHOLOGY
Decide your budget, develop your trading strategy, and then decide how you will diversify your portfolio. Remember that if you trade on a budget, you may also consider fractional shares.
Speaking about picking the ‘right’ stocks, you may follow a well-known path. A way to start trading stocks is to select stocks of companies that you are familiar with, so you can consider all factors that can move their prices.
Another way to pick is to focus on a specific industry. In that way, it would be easier to explore trends, news and overall industry health.
Learn from each trade, what worked and what didn’t. Always listen to what your book, the experts and the market is telling you, never your heart.
Keep risk management in mind. Understand the risks behind stocks trading and define your risk level. Stick with your plan but remember that it may evolve during the trading journey, revealing your strengths and weaknesses.
Here’s a quick recap on how to trade CFD stocks:
Eurotrader academy
A Wall street quote about stocks says, “If you don’t understand it, then put your life savings into it”. Although this sounds very promising, it could be really challenging or even disastrous. Dive into our digital ebook library to learn your stocks from the stacks.
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Eurotrade Investments RGB Ltd (‘Eurotrader’) is a Cypriot Investment Firm (CIF) under the Registration Number HE317893, licensed and regulated by the Cyprus Securities and Exchange Commission (CySEC) under license 279/15. Registered address at 70, Kyrillou Loukareos Street, Kakos Premier Tower, 1st Floor, 4156 Limassol, Cyprus.
Eurotrade Capital Ltd with registration number 10078767 and registered address at The Bower, 207-211 Old Street, London, England, EC1V 9NR, UK is authorised and regulated by the Financial Conduct Authority with license number 777162.
The information on this site is not directed at residents of United Kingdom, Canada, Japan, Australia, the United States, Belgium or any particular country outside the EU and is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.
RISK WARNING:
Trading leveraged products such as Forex and CFDs may not be suitable for all investors as they carry a degree of risk to your capital. Please ensure that you fully understand the risks involved, taking into account your investments objectives and level of experience before trading, and if necessary, seek independent advice. Please read the full Risk Disclosure.
As part of our efforts to safeguard our clients, Eurotrader offers extra protection through Civil Liability Insurance, covering traders for up to €2,000,000.
Risk warning: FX and CFD trading involves a high risk of loss. You should consider whether you can afford to take the risk of losing your money.
Risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.
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