Immense profits made on the stock exchange are common knowledge. Investors purchase shares of large corporations to benefit from their success. For companies, going public is a way to attract investment. For buyers, this is a viable way to make money. But did you know that any UK resident can access the market through a local broker?
How to Benefit from Stocks
Brokers like FXTM offer two distinct ways to enter the global marketplace — through the purchase of stocks or CFDs. Before delving into the specifics of Contracts for Difference, consider the conventional profit generation scheme. For companies and shareholders, this is a mutually beneficial tool.
Buyers of shares invest in the issuing corporation. Essentially, they now own a percentage of the business (even if it is a tiny fraction). Subsequently, they are entitled to a portion of the company’s profits, which is paid in the form of dividends. Alternatively, if the value of shares skyrockets, shareholders may sell them for profit.
Some traders prefer to leverage long-term changes, and they will hold their assets for lengthy periods. Others pursue different approaches to stock market trading, and they could buy and sell quickly. When stocks are purchased through a Forex broker, this imposes no time constraints.
In terms of choice, the most popular segment today is the ‘growth stocks’. These are issued by tech giants and circulate on NASDAQ. The demand for products and services from Apple or Facebook is unlikely to decrease any time soon. As modern society is obsessed with technology, experts may only predict further growth — hence the term.
Stocks or CFDs?
The key difference between conventional stocks and CFDs is the nature of traded assets. While shareholders, as the term suggests, own the securities, traders of CFDs speculate on their prices only. This second scenario eliminates the need for holding physical shares, making it possible to profit from the knowledge of market trends.
CFDs share a lot of their features with currency-based Forex trading, which is why both are often provided by the same brokers. The MetaTrader platforms, the all-time favourites of the currency communities, are also suitable for stocks and CFDs (on shares, commodities, or indices).
Arguments in Favour of Stocks
1. As long as you wish
Since there is no expiry period for this investment, you can hold on to your stocks as long as you like. Both long-term and short-term market shifts could prove beneficial. Here, solid analytical skills and strategic thinking come in handy.
2. Reduction of risks
Any experienced trader knows the value of diversified portfolios. Do not be dependent on fluctuations of a single asset. Instead, split your investment between several tools to achieve balance. If some of these underperform, the losses may be compensated by gains from others. For instance, negative results on the currency exchange are less intimidating when your stocks or commodities bring profits.
3. Risk as a healthy addition
To seasoned market professionals, this statement does not sound strange. Moreover, they may add stocks to their portfolios to introduce a moderate degree of risk. Overly stable selections have their drawbacks. After all, as the saying goes, nothing ventured, nothing gained.
Where to Begin
Unless you have already traded on Forex, you will need to register an account with the broker. Choose companies that are licenced to operate in the United Kingdom, which makes them subject to strict finance regulation. For example, FXTM, which works in 150 countries, keeps client funds separate from the firm’s capital.
Take time to explore trading functions of the recommended software (MetaTrader 4 or 5). Avoid using a live account until you have gained sufficient experience. The risk-free demo mode is a useful way to hone forecasting skills without putting actual money at stake.
