The Tradu Amazon stock trading guide
What are Amazon stocks?
Amazon (or AMZN) stocks are shares of the company that are available for public trading via the Nasdaq Global Select Market. The company is also listed on the S&P 100 and S&P 500.
Amazon was established in 1994 but it wasn't until 1997 that Amazon shares were able to be traded after an IPO (initial public offering). Amazon's headquarters are based in Seattle but the company have recently opened a second headquarters in Arlington, Virginia. Amazon does not pay dividends and has a history of splitting its stock a total of four times since trading as a public company. Despite achieving $149.2 billion in sales in the last three months of 2022, Amazon reported a significant drop in profit at the start of 2023, in part due to a lack of sales within its cloud computing businesses.
However, its global competitiveness, wide range of markets and innovation mean that Amazon stocks are still a popular asset for trading and investing.
After remaining fairly stable during the first few years of trading, Amazon saw its share price rise significantly after 2015. The company suffered a drop in line with other markets at the start of 2020 but then increased at an unprecedented rate until September 2020, when it stabilised around the 160 USD mark. Amazon stocks hit a record high of 186.12 USD in July 2021.
Recent months have seen a huge decrease in Amazon's stock price, amid global recession fears, news of redundancies and the company's slightly poorer performance over the past year in comparison to the previous two. As of August 2023, the value of the shares stood between 128 and 142 USD.
Although it's unclear whether AMZN stock will recover in 2023 – and, if so, by how much – the long-term sentiment remains more positive due to the company's strong position in the global markets.
What influences the price of Amazon stocks?
As with a large majority of other company stock, the AMZN stock price can be affected by multiple factors, some of which influence entire markets:
- Economics: The state of the global or US economy can heavily influence the performance of Amazon shares. As seen during 2022 and 2023, fears of a world recession, combined with rising interest rates and inflation, have affected the value and performance of many major global companies, including Amazon. Economic uncertainty has a large part to play when it comes to stock prices, especially for those companies that rely heavily on worldwide retail sales.
- Global events: Large-scale world events can create disruption and a shift in supply and demand. This was most notably seen during the recent pandemic. Almost all markets dropped significantly amid the initial uncertainty before many companies, including Amazon, regained traction and saw bear markets turn bullish in a very short time.
- Company reports: News, announcements and reports from the company can affect sentiment and, therefore the value of Amazon stock. If the company reports successful growth and profit, or acquisitions, the price of shares is likely to rise – whereas news of poor performance, staff lay-offs or unfavourable working conditions, for example, will have the opposite effect.
How can I trade Amazon stocks?
It's possible to trade AMZN stock via financial derivatives, which means that you don’t need to own the underlying asset. The main advantage of this is that you can trade either market direction and speculate on the price increasing or decreasing. There are two methods:
- CFDs: With contracts for difference (CFDs), you also buy or sell a contract depending on whether you think the value will increase or decrease. You'll profit or make a loss relative to the difference in the Amazon stock price between the opening and closing trades.
Leverage
Leverage can be used to increase your market exposure when trading via CFDs, so that you can open a position with a smaller deposit. Be aware, though, that using leverage can also magnify any losses.
How to invest in Amazon stock
As well as trading, you can also invest in Amazon stock. Unlike financial derivatives, this option allows you to buy shares directly which means that you own the underlying asset.
Some choose to invest this way, rather than trade the market, as it can offer a more lucrative longer-term opportunity. Long-term investing can also be seen as being less volatile, as traders can ride out any immediate market fluctuations.
However, there are generally fewer ways to make a potential profit as you will only benefit if the value of your Amazon stock rises, which means you can't speculate on price drops in bear markets. There is also still the risk of making a loss if the market remains bearish or drops significantly, which can happen unexpectedly for many reasons.
Advantages of trading Amazon stocks
- Trade during bull and bear markets: As we have seen, even the stocks of successful global companies can rise and fall unpredictably. Trading AMZN stocks allows you to take advantage of both rising and falling markets via financial derivatives.
- High volume: Amazon shares are highly liquid and therefore provide many trading opportunities within the market, whether you're buying or selling.
- Leverage: It's possible to open a position with a much smaller deposit when using leverage, allowing you to maximise your capital. However, it can also leave you at risk of greater loss should your trade go against your prediction.
- Market exposure: Amazon is a leading constituent of both Nasdaq and the S&P 100 so trading its shares means you'll gain exposure to one of the very top global companies.
Disadvantages of trading Amazon stocks
- Leverage risk: Seen as both an advantage and a disadvantage, leverage used to increase your position can leave you at risk of magnified losses as well as increased profits.
- Volatility and market fluctuations: As previously mentioned, there are a range of factors that can affect the price of Amazon stocks, some of which are entirely unpredictable. Despite robust technical analysis, sometimes markets move in opposite directions due to unforeseen influences such as world health crises, unexpected company news or wider market sentiment.
- Limited portfolio: Trading one company's stock restricts your market exposure and can leave you vulnerable to multiple influences. Rather than limit their trades to one constituent, many traders find it more profitable to diversify across a range of markets or company stock.
How to start trading Amazon stocks with Tradu
- Open an account: Open a Tradu account online to start trading.
- Create a strategy: Decide on your level of risk tolerance, create your trading goals and consider your preferred markets and available capital.
- Research: Take a look at Amazon stock historical data and implement technical indicators to maximise your profit-making opportunities.
- Open your position: Choose from CFDs to place your trade. Set risk-management tools to limit loss, then monitor and close your position.
- Explore our trading resources: Leverage our insights and increase your trading opportunities.
- Build your portfolio: Diversify with a range of other markets including CFDs on indices, forex and commodities.
