WHY DO STOCK PRICES CHANGE ALL THE TIME?
In combination with demand and supply, a number of market forces affect the values of stocks. Simply explained, an increased interest in a particular, stock or index will tip the scale in favour of "demand", and the price will increase proportionately. Should the opposite happen and many investors suddenly wish to sell, supply will outpace demand, and the price will drop.
These constant fluctuations are caused by real-time market sentiment, often in response to release of company financial reports, incidents that take place, or a public figure making a statement about the company in question. It is also influenced by news coverage, political factors, investor moods, social changes, enconomic factors, and natural disasters.
Other than the above, the market is also affected by the market itself. As many traders sell, others clamour to buy the stocks at the reduced prices. Their personally-motivated efforts serve a greater purpose: helping to stabilise the market until the next influencing factor arrives.
For example, with an account balance of $20,000, you may decide that you are willing to lose up to 1 percent of your total capital, which caps potential loss to $200 per trade. With this in mind, the lot size of your trade needs to be adjusted in line with your stop-loss order, while remaining aware of your selected leverage.
WHY IS STOCK TRADING SO POPULAR
Trading the stock market has gained in popularity over recent years, leading to more people wanting to find out what all the fuss is about. To put things into perspective, here are some of the main benefits of having an online indices trading account:
- Work from home. Enjoy the ability to earn a handsome paycheck while working your own hours from a location of your choice.
- Benefit from low commissions. The number of brokers currently available forces the industry to keep commission fees reasonably low. Market competition always benefits the consumer!
- Trade around the clock. It is easy to trade almost any time of day or night using out of hours trading.
- Easy to learn. After doing preliminary research, it's quite simple to pick up the basics from practice-trading using our free demo account. No deposits necessary!
- Available to everyone. Anyone with an internet-connected device can learn to trade and can see profits if things go well. No expensive equipment or specialised software is necessary.
HOW TO TRADE INDICES
Many things have changed since the birth of the stock market, and all of them in favour of new traders. Where shares were once bought in person by a broker on a trading floor, they can now be bought online in real time, regardless of location.
Purchase or sale orders are still played by brokers, who in turn place them directly with the stock exchange on investors behalf. While this may still sound complicated, the majority of the process is executed electronically and much of it automatically, with algorithms dictating the order of execution.
As a new trader, you will need to create an online trading account with a broker such as One Financial Markets. We recommend that you immediately select "demo-account" (called practice account by some platforms) and practice trading risk-free before despositing any funds. Most platforms offer a tutorial to guide you through their dashboard and trading process step by step.
TRADING INDICES VS FOREX
One of the most commonly encountered questions from new traders is whether they should invest in Forex or the stock market. The short answer is that it depends on your trading style and ultimate objectives.
Trading stocks and indices are generally considered long-term investments, especially when it comes to "blue-chip" stocks which have garnered a reputation for delivering returns. While the stock market is enormous with a huge number of stocks available to invest in, it is dwarfed by the Forex market in trading volume, despite the latter's comparatively limited number of investment choices.
The most common form of Forex trading is short term trades, being opened and closed within 24 hours at either a profit or a loss - or in some cases, at break-even point. Some trades are are as short as a few minutes or even a few seconds, depending on the style and goals of the trader.
Because Forex trades are commission-free, there are no significant downsides to making a large number of trades every day, provided ou know what you are doing and are not acting rashly. Conversely, stock trading involves a broker commission on every transaction. When it comes to stocks and indices, the more is not merrier.
AN ONLINE TRADING PLATFORM FOR INDICES
One Financial Markets is a diverse trading platform with indices being one of the options available. Sign up for a demo account today to get a feel for the dashboard, and once you're ready, start trading!