How To Trade Stocks
The stock market is one of the oldest markets to trade in. It's also one of the most popular, thanks to how accessible it is.
To help you find out more about how to trade stocks, we've created a guide that will tell you how to buy and sell directly, trade CFDs, and take positions. Read on to find out more.
Stock trading explained: read our guide
What are the different ways to trade stocks?
When learning how to trade on the stock market, you must understand the different ways it can be done. You can choose to buy and sell company stocks directly or trade via CFDs, where you can take positions on prices without owning any shares.
Real stocks
If you're looking to trade in real stocks, this means that you are buying shares in a company instead of trading in derivatives like futures, options and CFDs. There are different types of stocks to choose from.
Short-term trading is possible because the market can move quickly, especially if there are factors affecting the industry that the stocks belong to. For instance, there may be economic or political changes that drive stock prices up or down. However, you're also in a good position to invest long-term, especially if you trade in stocks in long-standing industries or sectors.
To trade in real stocks, you can open an account on a platform like the one we offer at Tradu. Fractional shares are available as part of our CFD offering, so you can access this market if paying for full stocks is too expensive for you at the beginning of your trading journey.
Futures and options contracts
There are differences between futures and options contracts. However, when establishing how to trade in stocks, you'll find that both are in the same category of derivatives[LS2] – instruments that are used to hedge risk, improve returns, or speculate on market price changes.
Both options and futures contracts give traders the chance to buy at a specific price by a set date. Please note that you cannot trade futures and options with Tradu and that they are included here for informational purposes only.
- Options contracts give traders the right to buy or sell shares at a specified price at any time before the contract expires. However, they're not obliged to buy or sell and this can happen at any time while the contract is live.
- A futures contract, on the other hand, is where a buyer purchases the underlying security or commodity – or a seller sells it – on a particular future date, unless the holder's position is closed earlier.
When learning how to trade in futures stocks, you can pick a market to trade in and decide whether to go long or short. Once you've placed your trade, you'll then need to set stops and limits before closing your position.
If trading options, there are different strategies available. The most common is to buy a call option if you expect the underlying market's value to increase. If it goes your way, you'd be able to profit by selling the option before it expires.
CFDs
Contracts for difference (CFDs) they involve speculation without owning the underlying assets. CFDs are a short-term trading option that sees investors trade in the direction they think the prices will move in. CFD traders will predict if the price of an asset will rise or fall. Traders who think it will rise will buy the CFD while those who think it will fall will sell the opening position.
Should the buyer see that the asset's price is rising, their position will be offered for sale. The difference between the price they bought at and the sale price are netted together. The net difference is the gain or loss from the trade and this is settled through the trader's brokerage account.
Should a trader think a security's price will fall, an opening sell position is placed. They have to buy an offsetting trade to close the position. As before, the net difference is cash-settled through their account.
CFDs use leverage. If you're new to trading stocks, it's important to be aware of the risks involved with leveraged trading before you begin.
Discover how to trade stocks with Tradu
It's easy to start trading stocks with Tradu:
- Open a trading account: Sign up for a Tradu account in minutes.
- Learn the ropes: Our market, trading and platform guides are designed to help build your knowledge.
- Create a strategy: Decide on your trading plan.
- Build your expertise: With real-time updates, it's easy to establish the best time to execute a trade.
- Expand: Once you know how to trade stocks, expand your portfolio by trying your hand at listed stocks and other different CFDs such as forex, crypto and commodities with your Tradu account.
Now you know how to trade in the stock market, read our other guides.
Types of stocks
What drives stock prices
Stock trading strategies
With Tradu you can trade stocks and Crypto via CFDs or you can own real stocks where you take ownership of the underlying asset.