Stock trading means having access to international leading brands such as Facebook, Google or Volkswagen among others. Binary options have democratised the access to trading these assets for traders of all walks of life.
At Stellar Finance, traders are given the opportunity to trade on a wide array of different stocks. Besides, to further empower the trades of our traders, we provide a daily market insight of the financial markets.
Before thinking of trading on stocks, you should be able to understand the mechanism of stock trading. You first have to understand what stock trading means and where does it come from.
Origin of Stock Trading
In the early 1600’s ships made long voyages across the vast streak of oceans taking several months to bring products from one region of the world to the other. Nevertheless, it often happened that ships met bad weathers or were attacked by pirates who stole valuable goods.
Therefore, to limit risks, ship owners adopted the practice of seeking investors who would invest money in the voyage. The principle was simple, people who invested would receive a percentage profit if the voyage was successful. Inadvertently, they were actually investing in companies, as stocks which are known today.
In our modern era, companies list their stocks for various reasons but mainly to raise money in a judicious way. There are basically two main ways for a company to raise capital, either by borrowing from financial institutions or by selling stocks.
Borrowing tends to tie the company for a long time especially if a large capital is required, whereas stocks do not pose this problem. However the ownership of the company is consequently diluted.
The Stock Exchanges regroups leading companies under their aegis. The value of individual companies affects the overall performance of indices such as Nasdaq, Dow Jones or Nikkei 225 among others.
Types of Stocks
There are two principal types of stocks trading available and traders should be able to discern them. It is important to properly grasp the basics of stock to be able to get the most out of your trading. It is in this optic that we have gone through the two most common form of stocks available, so as to provide a valuable insight to our traders.
A Common stock is the type of stock which is the most sought by individuals. When investors or shareholders are referring to stocks, they are usually referring to common stocks. The key characteristics of a Common Stock is that owners of this type of share, represent a form of ownership in the company. They actually own a unit of the company and can consequently claim dividends on a portion of profits that the company made, depending on the established procedures at the company.
Investors have the right to get one vote per share and elect those who will be board members. Common stocks have many advantages in the long term, they encourage capital growth, hence higher returns.
Preferred Stocks just like common stocks, entail ownership in the company but they do not give voting rights. Preferred stocks give the opportunity to shareholders to benefit from a fixed dividend for an unlimited amount of time. Moreover, in the event that the company finds itself in a compromising situation and needs to liquidate its assets, preferred shareholders are paid in priority over those owning common shares.
Preferred shares, however, are callable, that is the company which has issued them have a privilege in redeeming back the shares, at any given time for any reason against usually a premium which is offered to the investor.
Types of stocks
(1) Google(2) AIG(3) Samsung(4) Coca Cola(5) Facebook
At Stellar Finance, we made sure that all the leading stocks are made available on our trading platform such that our traders are given the choice.
Factors impacting on Stocks
Stocks are impacted by a wide range of influencers which are not always controlled by the company. Traders carefully scrutinise information which can give them an eventual clue on whether the value of the asset will rise or fall, hence helping them to make accurate predictions.
- Political : DDecisions taken by governments have a direct impact on the value of stocks. New legislations requiring a new framework will require companies to follow the rules hence affecting stocks. Political decisions are often external factors on which companies do not have any control. Political stability also has an impact on the value of stocks.
- Natural Calamities :These are independant of companies but have a large impact on operations. When the operations of companies are affected, the value of the stock will definitely be influenced.
- Demand and Supply : The market mechanism of demand and supply affects the value of stocks. When supply exceeds the demand, there are more units out, hence the value of these units will fall causing the value of the stock to fall.
- Major recruitments : The CEO of a major company being freshly appointed, will have his/her own ways of melding the business which could either boost the sentiment of investors or dampen prospects causing the asset to lose value considerably.
How to trade Stocks with Stellar Finance?
- Log in your trading account. If you do not possess one, you are kindly requested to open one here.
- Choose the trading tool which you prefer.
- Once you have your trading tool, click on the Stock tab which is located at the top of the trading platform. Choose your preferred asset from the list of stocks and set an expiry time.
- Choose ‘Call’ if you think the price of the chosen asset will rise and select ‘Put’ if you think the price will fall at expiry time.