What is Share(Stock) and Index first of all?
Stock(Share) is the very basic of Investment
A Share(Stock) is a unit of ownership in a company.
When you buy a share you become a part-owner, a shareholder, in the company.
Many people are firstly interested in trading Stocks, as it is a widely known investment option.
A stock exchange is a market on which shares are bought and sold or traced.
For a company’s shares to be traded on a stock exchange, they must generally be listed on that stock exchange.
All share prices are quoted with a “two way price”, a bid and offer spread which is the price that you can buy(also called “the offer”) and the price that you can sell the particular share(also called “the bid”).
This price will update continuously throughout the market opening hours.
The market opening hours is not 24/5 like Foreign Exchange Market, but limited to about 9 hours a day.
The width of the spread will be different for particular shares depending on the liquidity of the shares, how easy it is to buy and sell the shares and how much volume is being traded.
Index(Indices) is the average of popular stocks
Index is a measurement of the value of a section of the stock market.
It is computed from the price of selected stocks.
It is a tool used by investors and financial managers to describe the market, and to compare the return on specific investments.
An index represents the performance of the stock market of a given nation – and by proxy, reflects investor sentiment on the state of its economy.
The most regularly quoted market indices are national indices composed of the stocks of large companies listed on a nation’s largest stock exchange, such as the American S&P 500, the Japanese Nikkei 225 and the British FTSE 100.
“CFD – Derivative Product” What is this?
If you have been searching for information of Financial Markets, you must have heard about “CFDs” along with “Shares” and “Indices”.
CFD or “Contracts for Difference” is a contract between two parties speculating on the movement of an asset price.
These two parties are normally the “Investors” and a “Company” which offers the CFD investment solution.
This method allows traders to speculate on an asset price movements, without the need for ownership of the underlying asset.
There is a large range of assets available as CFDs including global indices and stocks and shares.
CFD is a Derivative Product
By trading CFD product, you will never have the physical assets such as stocks and commodities, because CFD is a “Derivative Product” provided by each financial companies.
The financial companies use the market price of each underlying asset and creates another market for their clients, and the companies allow their clients to trade(buy and sell) by counter-ordering all trades of clients.
This will also create a Conflict of Interest between two parties as they are trading Over-the-Table.
For example, if you are seeing a price chart of a Stock CFD, the price will move exactly the same as the one of underlying asset.
On the same price chart, you can buy and sell at anytime as long as the opposite party allows you to trade such positions.
In fact, you can not sell and profit from falling prices of a Stock, but you can do that through “Stock CFDs”
Why Trade CFDs but not the Real-Stocks
There are many advantage that investors choose to trade CFDs but not the underlying assets.
Such as the commissions, leverage, liquidity and etc.
We will get into more details of each advantage below.
Forex Investment “E-Book Leaning” for Beginners
To become a successful trader one requires to take a long journey that takes commitment, dedication and discipline.
The market will not always give the trader what he/she wishes for.
There will be times when euphoria is followed by feeling of regret, frustration and pain.
A trader needs to be able to manage emotions and trade to a plan.
A failure to follow the rules will ultimately lead to a promising trading career ending prematurely.
FBS’s e-book has been written to give traders who are new to the market as much information as possible in the shortest space of time.
Reading the e-book should give a trader that is new to the market the basic guidelines to approaching what can be a very exciting and rewarding profession.
However it is up to the trader to go out and find as much information as possible on trading.
Be it books, online video’s, chat rooms or by subscribing to the detailed news letters to all traders.
There is also a wealth of knowledge to be found on each Online Forex Broker’s website.
Furthermore their investment research department is always available to assist you where possible.
So what is holding you back? Join FBS today and check out their latest educational tools!