The pennant is a continuation breakout pattern found across many CFDs like FX, crypto, stocks, metals and options resembling a pennant with a flagpole. We have two types: the bullish and bearish pennant chart patterns.
A pennant is a long narrow flag… nope, we are not talking about those flags you see in high school sports teams or ships! Here, we are referring to the chart pattern, which, of course, resembles a pennant.
Traders have created peculiar names like shooting stars, head and shoulders and Doji stars for interesting formations they see in the markets. The pennant is no different. So, without further ado, let’s put a magnifying glass on this set-up and how to trade it.
What is the pennant chart pattern?
This is a continuation breakout pattern found across many CFDs like FX, crypto, metals, stocks, and options resembling a pennant with a flagpole. We have two types: the bullish and bearish pennant chart patterns.
The bullish version of the set-up is where we expect rising prices, while the bear pennant chart pattern is where we expect falling prices.
In either case, this occurs regularly in trends to signal a pause or consolidation, as traders take profits and decide the next direction.
The highs and lows begin converging into a vortex. Such a formation leaves the price no choice but to break out of the structure. This makes the pennant effective because the result is usually a fast, parabolic-like movement.
Identifying the pennant chart pattern
Before going deeper into the components of the chart pennant pattern, it’s common for traders to confuse it with other formations like the symmetrical triangle and wedge.
Let’s start with the triangle. A symmetrical triangle is quite similar to a pennant because it’s a continuation formation. However, the distinguishing factor is the ‘flagpole’ present in the latter but not in the former.
Here’s an image of a symmetrical triangle below (for comparison purposes).
Pennants also look strikingly like wedges. The main difference is that the triangle structure with the former is horizontal, while wedges have an ascending or descending triangle. Here is an image to demonstrate this.
With the confusion out of the way, let’s look at the main elements of the pennant chart pattern.
This formation consists of the following:
Flagpole: This is the first leg of the movement before the consolidation.
Breakout zone: This is where we expect the market to push out of the pennant forcefully.
Pennant: This, of course, is the crux of the entire pattern. A pennant is triangular, consisting of two trend lines converging at about a 45° angle. These act as the support and resistance where the price bounces.
As a rule of thumb, the trend line should touch at least three swing highs/lows to be valid.
Now that you know how to identify this set-up, let’s look at the simple entry and profit-taking rules.
The basic way to enter the pattern is to place pending orders at the breakout zone. However, some traders prefer to use live execution once the price has confidently broken out.
Either way, it’s a conservative approach to enter once the breakout has occurred compared to another period.
Your stop loss should be at the most recent low of the support (for a bullish pennant) or the most recent high of the resistance (for a bearish pennant).
Finally, the profit target is generally the distance of the flagpole. Here is an image demonstrating all of these parameters in better detail.
Pennant pattern chart examples
Let’s go straight to real markets to see this set-up in action. Our first example shows the bullish candlestick pennant chart pattern on GBP/JPY. Here, we see two nice impulses before the formation of the flagpole.
This, of course, led to the pennant. We have labelled where your entry and stop loss would have been below. Additionally, the market travelled the height or distance of the flagpole.
Now let’s look at the candlestick pennant chart pattern on the CAD/CHF pair. The set-up begins with a downward impulse (the flagpole) before the price contracts. After the formation, the market moved even further down.
Conclusion
The pennant chart pattern is a rare formation. But it can be pretty effective once it appears, particularly in higher time-frames. As with other set-ups, you should always add more confirmation elements to your trading idea to increase the probability of success.
One thing to consider is that geometric set-ups like pennants generally need larger stops. Therefore, you may choose to enter at a different time than usual. Regardless, your reward must always be at least twice the risk.
Contract for differences trading may sound like a complex thing. However, it dominates most online trading globally, from FX to precious metals. This is because CFDs allow us to trade numerous instruments without owning them. We can also go ‘long’ (buy) or ‘short’ (sell), which is impossible through physical ownership. Overall, CFD online trading is the most accessible way to invest or speculate in the financial markets.
Contract for differences trading may sound like a complex thing. However, it dominates most online trading globally, from FX to precious metals. This is because CFDs allow us to trade numerous instruments without owning them.
We can also go ‘long’ (buy) or ‘short’ (sell), which is impossible through physical ownership. Overall, CFD online trading is the most accessible way to invest or speculate in the financial markets.
Let’s cover this topic in more detail.
What is a CFD in trading?
A CFD is simply a broker-trader arrangement to exchange the difference between a financial asset’s opening and closing price (hence ‘contract for difference’ or CFD).
The broker will pay the difference in profit based on the closing price at the end of the position. On the other hand, if the position is not favourable to the trader, the broker will debit their account.
Let’s make a simple example to demonstrate CFDs online trading. Suppose you took a buy forex spread bet position at 7114.5 at £10 per point.
Consider two scenarios: if the market moved 35 points and you closed the trade at this point, your broker would credit your account with £350 (35 X £10).
Conversely, if the market moved 37 points against your set-up and you exited at this stage, your broker would debit £370 (37 X £10) from your account.
We commonly refer to contract for difference trading as derivatives, meaning that the financial instruments are derived from real-life assets. Essentially, it’s trading a ‘replica’ without actual possession while being able to make profits and losses from it.
Key components of CFD online trading
Now let’s look at the standard elements of CFD trading accounts.
Leverage: This is, of course, the most attractive ingredient to CFD online trading. Leverage or margin allows you to trade the full value of most markets using a relatively small account balance using ‘borrowed’ funds from your broker.
Below is a simple visual to demonstrate the difference.
Although leverage is a capital amplifier, your profits and losses are based on the entire
value of whatever you’re trading. Leverage magnifies both equally, a significant concern when it comes to losing.
We express CFD online trading leverage as a ratio (e.g., 1:100 or 100x), and these vary widely depending on the broker, market and specific country regulations. For instance, if the value of a position was $10 000, 100x leverage means that you would only need $100 to open this trade (10 000 / 100).
The margin in CFD trading forex pairs is, by far, the highest of any financial instrument. It’s common to receive ratios from 1:100 up to 1:1000 (or sometimes unlimited). The leverage in other products like CFDs in commodities and CFD stock trading is often on the low end of the scale.
Something also worth mentioning is that some markets, like futures, have further margin requirements. So, in addition to the initial margin (or the amount you need to open the position), you also need a maintenance margin to hold the position.
Lastly, because leverage equals borrowed funds, interest is necessary, also known as a swap or rollover. In most cases, this applies to every night a position is held. But some exceptions exist, like with crypto futures, where the rollover applies every four hours.
Sometimes, it is possible to earn from swaps, particularly in forex, where you buy a currency with a higher interest rate and sell it against one with a lower rate.
Long/short duality:
Another massive appeal to CFD online trading is that you can buy and sell a particular market (in many cases, you can do this simultaneously. While this may seem like an everyday thing, it’s not possible when you own the physical version of a financial instrument.
For instance, you buy a cryptocurrency like Bitcoin (BTC) from an exchange at $20 00 at 1 BTC. At some point, you decide that the price will drop from this point, and eventually, it does.
With contract for difference trading, you would have been able to open a sell position at $20 000 and profit from the drop.
Buying the actual coin means you can only profit from selling it to the exchange at a higher price than $20 000. On the other hand, a CFD allows you to sell a market without having bought it or buy a market without having sold it.
Unlimited duration: Theoretically, you can hold a CFD position for a limitless time, provided you have enough margin to maintain it. Therefore, CFDs are suitable for all trading styles, from scalping and day trading to swing and position trading.
OTC trading: All CFD online trading happens ‘over-the-counter’ (OTC). This means that markets are provided between private dealers or brokers without a central exchange.
OTC trading allows higher margin and lower capital requirements compared to an exchange. Also, you can expect more experimental trading products like binary options and unlimited leverage in forex.
Most popular types of CFD online trading
Let’s look at the most common CFD online trading you’ll find.
Foreign exchange: CFD trading forex is speculating on the prices of different foreign currencies.
Stocks: CFD trading stocks is buying and selling shares or equities listed on numerous stock exchanges worldwide.
Crypto: speculating on the prices of many digital currencies.
Options: these CFDs offer you the right, but not the obligation, to trade various markets at a certain expiry time.
Futures: these CFDs allow you to buy or sell a particular financial instrument at a later expiry date and time.
Indices: the trading of such CFDs involves indexes primarily from stocks (but also forex, commodities, crypto, etc.)
Bonds: these CFDs include trading government bonds like the US 10-Year Treasury Note, UK 10-Year Gilt and Japan 10-Year Government Bond.
Advantages of CFDs trading
By this stage, you can confidently answer the ‘what are CFDs in trading?’ question. Now let’s look at their benefits.
Leverage: As stated earlier, this feature is the most attractive part of trading CFDs. Leverage is the only method of making substantial profits in the shortest time.
It also means you can start with lower capital and achieve better returns compared to unleveraged trading. But, if used irresponsibly, leverage can quickly lead to massive losses.
No physical ownership: No trader wants to hog around gold bars or keep a stash of currencies in a safe (both of which are expensive). CFD online trading is an efficient way of creating wealth without physically owning many different financial assets.
Duality of going long and short: This is another substantial plus to trading CFDs. You never have to own any market to buy or sell it. Also, this duality means you can hedge your positions (i.e., buy and sell several securities at the same time).
Diversification: CFDs allow you to trade a variety of unrelated markets on one platform or broker.
Disadvantages of CFDs trading
Of course, there are two sides to every story. So, let’s look at the downsides.
Potential for over-leveraging: The main drawback of CFD online trading is the ease at which you may lose substantial amounts of money quickly. You can withstand drawdowns for an extended period without leverage because you often have to invest more.
Overnight fees: As stated earlier, swap fees (along with spreads) are the direct costs of trading CFDs. Although these are typically minimal, they can add up to a sizable amount for long-term positions.
In some cases, they can also be higher than the average, e.g., with exotic forex pairs.
Lack of regulation with some CFDs: Anti-CFD proponents often label the industry as the ‘Wild West’ due to the decentralized or OTC structure of CFD trading. In many markets, it’s common to find unregulated brokers or the deceptive promotion of certain products.
Conclusion
Ultimately, CFD online trading is best suited for short-term trading. While some experts will advocate for buying unleveraged physical financial assets, this is not something everyone can do. The main reason is, of course, the amount of required capital.
Also, tangible ownership in some markets comes with extra costs for storage (as with commodities) or safekeeping (as with digital currencies).
Each avenue is suitable for certain groups of people. Some prefer long-term investing, so they will benefit from owning certain assets in their actual form. Conversely, others, particularly the younger generation, desire short-term capital gains.
Overall, despite the immense benefits, CFD trading certainly has more risks involved, which you should be aware of at all times.
Are you looking for the benefits of forex trading, but aren’t you sure where to begin? Find out more about our top ten benefits of trading in the volatile foreign currency market.
There are multiple markets that professional traders use to make a profit. If you’re looking for the benefit of forex trading, this is a question that we will dissect. What specifically about the forex market do traders consider as a benefit?
Today we will examine the benefit of forex trading for both retail investors and institutional investors. The latter means large investors with access to billions in capital. It includes pension funds, investment banks and hedge funds. Retail investors use their wealth to try and turn a profit and usually operate on the much lower end of the scale. So first off, let’s start with the basics.
What Is Forex Trading?
Forex trading is the buying and selling of currencies on the foreign exchange market. A key benefit of forex trading is that it is a global marketplace where traders can exchange currency pairs. If you are wondering when you can trade forex, the market doesn’t close during the week; it is open 24 hours a day. As a result, it is one of the most liquid markets in the world, with an estimated daily turnover of over $7 trillion.
Main Currency Pairings
While dozens of currencies are paired, the main trading pairs that see the most volume revolve around the US Dollar. Due to the liquidity involved, there is more guarantee for traders looking to buy and sell significant positions. As the optimum world currency, the US Dollar trades in major pairings of the Euro (EURO), GBP (Great British Pound), and Canadian and New Zealand Dollars (CAD/NZD). Other pairings include the Swiss Franc (CHF) and the Japanese YEN (JPY).
As well as forex trading benefits allowing access to high liquidity, low transaction costs, and the ability to use leverage to maximise your profits. Additionally, traders can take advantage of scalping, hedging, and arbitrage strategies.
Scalping for beginners might not be the easiest way to begin your trading journey. However, money is still to be made in this industry so long as you understand it correctly and conduct thorough market research. One of the benefits of trading forex is that you can build your knowledge yourself.
However, you can still lose all your money even with the best knowledge of the market and the utmost due diligence. This is because your capital is always at risk, and even though the market may have behaved in one way historically, this doesn’t mean it will do the same again.
Medium To Long-Term Investment Strategies
One option for those looking to implement an investment strategy over a more extended period is swing trading. If you’re entering the forex trading market in 2023, there are many things to consider. First, irrespective of your trading strategy, you must perform a lot of research. If you do not understand the currency pairings you are trading, this is very risky, and you could lose a lot of money.
Whether you are trading short, medium or long-term, there are several chart patterns you can attempt to use to your advantage. This includes several different candlestick patterns, which you can also learn about.
With these features combined, forex trading can be an attractive investment opportunity for those looking to diversify their portfolio or increase their earning potential. Trading with a full-time job is more difficult as you do not have as much time as professional traders. However, a lot of experienced traders will mix their forex portfolio with other tradable assets, including
Now that we have established the sort of portfolio spread you can find on the books of many professional traders and identified why forex trading is so propitious for many, let us find out the specific benefits of forex trading. Instead of focussing on a singular benefit of forex trading, we have highlighted ten for you today.
#1 – Leverage & Margin
Leverage and margin are two of the most critical concepts traders need to understand when trading in the forex market. However, this technique is not advised for beginner traders. The benefit of forex trading is that you can use these tools due to the high levels of liquidity in the market.
You can leverage a currency pair anywhere between multiples of 1 to 100. One of the critical differences that you must be aware of is that you can be liquidated when using leverage. A standard spot trade can be rough if there is a serious market correction. However, not as bad as a leveraged trade.
If you do not employ effective measures such as a stop loss or take profit level, your entire position could be liquidated if it reaches a certain point. So this definitely wouldn’t be a benefit of forex trading if you poorly executed it.
A trailing stop loss is one of the most common tools to mitigate risk effectively. Another benefit of forex trading is that you can use automatic levels to buy and sell your asset and remove the negative emotions of trading.
Leverage allows traders to control a more significant amount of capital than they would be able to with their funds. At the same time, the margin is the level of capital to authorise the position. For example, George Soros used leverage to short the GBP on Black Wednesday in 1992 and netted millions of dollars.
Traders can use leverage to increase returns on investments, while margin accounts can help traders manage risk by allowing them to maintain a smaller balance in their accounts. Understanding these concepts is an essential part of successful forex trading.
#2 – Low Transaction Cost
Low transaction cost is a benefit of forex trading that most traders will highlight as the main selling point. Of course, this can vary depending on what country of the world you operate in. However, generally speaking, the transaction cost is one of the key benefits of forex trading. With the help of low transaction costs, traders can save a lot on their trading expenses. This is because the spread cost is generally lower than in other forms of trading.
The spread cost is a fee brokers charge for executing orders in the market. Depending on the currency pair and broker, it usually ranges from 0 to 2 pips. Low transaction costs make it easier for traders to enter and exit trades quickly without incurring significant losses due to high spreads. Therefore, shorter-term trading methods such as scalping are preferred to more extended periods such as day trading.
Overall, low transaction costs are essential for successful forex trading as it allows traders to keep their trading expenses down while still capitalising on potential profits from their trades.
#3 – High Liquidity
With quotes such as “fortune favours the bold” and “if you don’t risk anything, you risk everything”, – beginner traders might be enticed by the profits on offer courtesy of some big traders and investment banks. However, with big banks slashing banker bonuses, it is crucial to get a balanced view.
Much like anything in life, the truth is somewhere in the middle. There is no get-rich-quick scheme, and trading forex is a tough market to navigate, especially as a retail trader or investor. That doesn’t mean that you won’t be able to
Some traders make large amounts of money due to the high liquidity on offer. High liquidity is generally regarded as a crucial benefit of forex trading. Essentially, this means that in the event of a serious price retrace or boom, the money is available for you to buy or sell your chosen forex pair.
#4 – Volatility
Volatility, however, is the degree to which an asset’s price fluctuates over time. High liquidity and volatility in forex trading can offer traders a range of advantages, such as reduced transaction costs, faster execution times and greater flexibility when entering and exiting positions. It’s not all fun and games, though.
As ever, markets are so dangerous because what goes up must come down. A severe correction can result in a heavy loss, and as we touched on earlier, if you are trading with leverage, you could lose all of your money. However, if you time your trade at the bottom and the market rebounds, the volatility can be seen as a benefit of forex trading.
#5 – The Internet
Despite naysayers and eternal pessimists besmirching the impact of the internet on society, there are many positives. Many would argue that it has also facilitated a tremendous amount of good. The rise of the internet is one of the biggest forex benefits.
Knowing what news will move the market is vital if you implement effective trading psychology. Economic news, world news and global economic indicators are just three crucial components. Another benefit of forex trading is that if you can observe these correctly, you could begin to have a strategy that works.
Due to the substantial institutional investment, many multinational and multi-billion dollar corporations have skin in the game. This is why trading forex is considered a better market for some traders, as you can’t as quickly move it up or down compared to markets such as cryptocurrency.
#6 – 24/7 Market Accessibility
Forex trading offers investors the opportunity to access the global market 24/7. Some may argue that this isn’t necessarily a benefit as the market could move in the middle of the night when you aren’t at your trading desk. However, the risk management strategies discussed earlier are one way to turn a potential negative into a serious benefit of forex trading.
This benefit is significant for those who want to take advantage of international market movements without worrying about time constraints. This type of trading benefits people on all levels of the financial spectrum, irrespective of the time zone.
For instance, if you are trading outside your full-time job, this may be a positive for you. But, on the other hand, stock trading can be more difficult, as the markets are only open between New York business hours.
Why trade forex when you can trade during business hours and rest easier in the evening? Well, that is one market often made, which entirely depends on your trading psychology.
With 24/7 market accessibility, traders can make decisions and execute trades at any time of day or night, allowing them to capitalise on profitable opportunities no matter when they arise.
This benefit also allows traders to monitor their positions and adjust as needed, ensuring they are always in control of their investments.
#7 – Variety of Trading Instruments
Trading instruments are the tools that traders use to speculate on financial markets. They come in many forms, such as futures and buying or selling options. A variety of trading instruments is essential for traders to diversify their portfolios and manage risk more effectively. Moreover, insulating yourself from a serious market downturn is critical to turn forex trading into a prosperous venture.
With various trading instruments at their disposal, traders can also reduce the risk associated with investing in one asset class or instrument by diversifying their investments. It may not be a benefit of forex trading, but it makes up part of a more extensive portfolio which contains forex.
#8 – Available Literature
Unlike other markets, forex has a set rule of criteria that some incredibly successful traders have used in the past. Although cryptocurrency has proved an extremely lucrative avenue for some, as it is such a new market, you won’t find a wealth of literature on the topic from experienced and reputable traders.
This doesn’t mean you will be able to become an overnight success story; far from it. However, the internet isn’t always reliable, and the trading advice isn’t verified. Nevertheless, there are plenty of forex trading books, which is a benefit of forex trading, leading to it becoming a popular income stream.
#9 – Online Communities
This one can act as a positive and a negative. The internet is a global forum; not all advice will be in good faith. However, there are plenty of professional traders who offer support online.
Whether via their YouTube channel, paid subscription services or active social media accounts. We aren’t saying you should pay money for their services, but you can find plenty of good advice online. Hence, the online forex community is another critical benefit of forex trading.
#10 – No Overall Ownership
Arguably the most underrated benefit of forex trading is that there is not one sole entity that drives the price of assets. Instead, Forex markets move in line with the economy, and many analysts state this is why trading forex is a better market than other assets such as stocks or cryptocurrency.
Some have argued that commodities markets such as gold and silver operate similarly. However, forex is so intertwined with the value of several of the world’s biggest economies that there are no questions about ownership, market manipulation or liquidity issues.
Stock trading is one of the world’s biggest markets. Second only to forex trading in terms of 24-hour volume and over a Century old, it has now moved into the all-encompassing and vast digital platform of the internet. Knowing how to buy stocks online is pivotal to making the most of your trading journey and understanding what makes the market work.
It can be a minefield knowing how to buy stocks online. Plenty of providers are more than willing to facilitate your investment. However, finding the one that works for you should be the key determining factor. Even though retail traders used to operate in this market before the internet, the advances that the internet has brought to society have completely changed the game.
The ever-expanding industry is big business for stockbrokers. It is essential to filter out the platforms with higher fees or will charge you more for the type of trading you undertake. For instance, if you are a day trader who executes more trades than a swing trader, you want to examine the individual fees. Some brokers will charge a flat rate for specific packages.
Day trading includes different types of methods, such as scalping. Of course, you can scalp in other markets such as forex, too – but make sure you notice the fees you are charged are crucially important. We appreciate you may have already grasped this concept and are saying to yourself, “Yes, but how can I buy stocks online?” – don’t worry. We will be looking at the key things you should do when you buy stocks online and how you can make the most of your trading journey.
Can I Buy Stocks Online?
Yes, it isn’t just institutional traders that can buy stocks. However, they are the ones that move the market more than retail traders. A retail trader is somebody like you or me who uses their savings as their capital to try and turn a profit on the stock market. Recent reports have shown that this type of trading has hit an all-time high in trading volume.
Other markets, such as forex or cryptocurrency, are open 24 hours daily. For example, the forex market isn’t active over the weekend, but the cryptocurrency market is available 24/7. Traders have more flexibility in these markets if they have a full-time job. Still, it can also be detrimental, as other major financial hubs in different timezones can cause peaks and dips at inopportune moments.
An institutional trader is somebody who trades professionally. This can range from portfolio managers to large investment banks such as Goldman Sachs, JP Morgan or Deutsche Bank. Institutional traders who operate on the trading floors of some of these financial behemoths will manage risk in the tens, sometimes hundreds of billions.
Being aware of how much pull these markets have is vital to note. Even if you are trading with a sizeable portion of your net wealth, you are still a drop in the ocean compared to these companies.
Finding Your Feet In The Market
The stock market is one of the more traditional markets. However, individual financial hotspots can see multi-billion-dollar trading volume daily. This is exciting as a retail trader, and the wealth of opportunity in this market drives you to find out how to buy stocks online.
Before you begin to place your hard-earned money on an exchange to purchase stock, starting with small steps is a good idea. For example, find out the sort of news that drives the market. You can do this by following some prominent stock traders on social media. In addition, you can subscribe to a reputable finance magazine to get a better indication of what drives the price action.
Finding an online stockbroker that provides you with plenty of information on buying and selling stocks online instead of just looking to obtain a sign-up fee is a good start. There are plenty of reputable stockbrokers online, depending on the type of trading you want to implement into your overall trading psychology.
Another good point is that you should focus on simplistic strategies at first, such as spot trading. Then, once you have a good grasp of the market and understand basic concepts, you can look at more specialist instruments such as options trading or futures.
You must understand that even if you begin to grasp how the market works, you can still lose your money trading. So your capital is always at risk, and futures trading, in particular, carries much more risk than standard trading. This is one of many lessons in learning how to buy stock online.
How Do I Buy Stocks Online?
There are hundreds of reputable websites online. Some banks offer a facility through specialist accounts. You can also use free trading platforms. Robinhood and Charles Schwab are two examples of online brokers that allow you to buy stock online without paying fees upfront or any commission on your trades.
An online stockbroker is the most straightforward way of buying stocks. Irrespective of whether you want to trade or hold for a considerable period as a long-term investment.
Although online stockbrokers are the most popular way for retail traders looking to buy stocks online, there are other avenues.
A Full-Service Stockbroker
Many wealthier clients will opt for the services of a full-service stockbroker. This is because they often act as middle management for their wealth. A full-service stockbroker is a financial professional who provides various services and advanced coverage when looking to buy stocks online. These services include but are not limited to
Investment Advice
Portfolio Management
Research And Analysis
Trading Execution
Retirement Planning
Tax Advice
Estate Management
Large financial institutions such as investment banks or prominent brokerage firms employ these stockbrokers. Generally speaking, if you are just starting, plenty of online stockbrokers do not charge a fee, and their platforms and mobile apps are easy to use. A full-service stockbroker is usually for a small percentage of incredibly wealthy clients.
Discount Brokers
If the idea of a full-service stockbroker interests you but you are scared by their high rates, a discount broker might be a better option for you when looking at how to buy a stock online.
Discount brokers offer a similar service to full-service brokers but provide a less comprehensive service for a smaller fee. Due to the explosion of retail traders looking to enter the market but with limited knowledge, the discount broker sector has become more prevalent for investors looking to buy stocks online in recent years.
Given that their management fees are lower, and in some cases, the administrative costs are minuscule, this can be the perfect middle ground for beginner retail traders. Using an avenue of tried and tested professionals who have proven experience in how to buy online stocks is a wise move for people who are still getting to grips with how the intricacies of the market work.
Can I Buy Stocks Online Directly From The Company?
Maybe you want to be more hands-on and don’t want to employ the services of a middleman or an online stockbroker. Many corporations allow you to do this if you’d instead go directly to the company. Depending on the company’s size, some will offer stock to existing employees.
If you are not fortunate enough to have a job at Apple, you can buy stock directly from them or any other company that provides the facility. You can do this via two methods:
A Direct Stock Purchasing Program (DSPP)
A Dividend Reinvestment Plan (DRIP)
If you use either of these methods to buy stocks online, you can detour around fees you can accumulate through some brokerages and interact with your company of choice directly.
Stock buybacks are another method that big corporations use. This is when they buy back stocks to conserve the stock price or dilute volatility. When a company instigates a buyback, they usually have more stocks to purchase directly if you want to use something other than a broker.
How To Buy Stocks Online With Small Capital
“Small capital”, by definition, is subjective. Small capital to Goldman Sachs could be $50 million, and significant capital to a retail trader could be $500. This depends on your situation. No two traders are the same, and some people who buy stocks online are more adept to the risk management aspect of trading and investing. It is challenging to understate just how vital effective risk management can be if you’re a beginner.
Buying stocks online doesn’t matter if you’re looking for a quick short-term profit or a long-term investment. So long as you implement plenty of risk management into your approach, you can help insulate yourself from volatile market conditions.
Stocks don’t have the same level of risk and volatility as other markets, such as cryptocurrency. However, certain stocks can, and if you invest in penny stocks, for example, these investments are notoriously volatile for misselling and fraud, such as the infamous Wolf of Wall Street.
This is why market research is so important. So long as you know how to handle the risk and what to look for, you should be able to build yourself a decent portfolio.
Can I Use A Mentor To Help Me Buy Stocks Online?
Yes, of course, if you are looking to enlist the help of a specialist, you can do this across a range of markets. If you are trading forex, for instance, you can look to onboard a mentor to help you navigate the markets to give you a better understanding. However, plenty of stockbrokers offer this facility if you want to buy stocks online.
Firstly, you must ensure the mentor is the right person for you. For example, do they have a proven track record? Do they use risk management tools properly? Do other traders recommend their service?
A full-service broker can act as a mentor, but they are essentially fund managers. A mentor is a teacher who will one day direct you into navigating these turbulent markets for yourself. Therefore, picking wisely could be the make-or-break decision which turns your stock trading venture into a success or a failure.
Where Do I Buy Stocks That Interest Me?
Stockbrokers can tailor many of the methods we have discussed today to suit your needs. For example, online stockbrokers can recommend certain shares depending on what type of market you want to invest in. If you’re looking for ESG investments, stockbroking platforms and stockbrokers that are more hands-on will be able to recommend various investments.
You are at an advantage if you can control your emotions and follow your plan. This is the number one reason retail traders lose money. We understand that watching your portfolio depreciate rapidly is uncomfortable.
So long as you use the money you can afford to lose and understand that your capital is always at risk, you can buy stocks online with a clearer head. However, irrespective of how well you know the markets, you can still lose your investment, so it is important not to overcommit funds when buying stocks online.
Conclusion
Knowing how to buy stocks online is an essential step on your journey. Remembering that there are no shortcuts when trading or buying stocks online means you can approach the challenge with a level head. If you are practical and aim for modest, marginal gains, this is far more realistic than aiming for one big home run.
Take time to weigh up all these options we have discussed today and decide what technique and method is best for you. Once you have decided, you can buy stocks online and hopefully turn them into a passive income stream.
Looking for more information on the types of trend lines you can find in trading? There are basic ones, intermediate ones and complex ones that professionals use. Find out more information about the five main types of trend lines traders use here in our article today.
It can be overwhelming when you first start to trade and hear about different types of trend lines. Where do you begin? Should you study the price charts? What about the economic news? What is Bitcoin? Knowing where to begin is the first step you take in trading.
Trading on the market is a great leveller. It separates the good and bad traders. Those traders who know how to identify types of graph trends are often more talented at spotting investment and trading entry points. Especially when compared with those who jump into a trade based on an Elon Musk tweet. Some of the markets where you can trade include:
There are dozens of strategies, tools and techniques that professionals use. Even successful part-time traders can spend enough time and resources to understand what drives the market. One of the critical things that professionals use as trading indicators is different types of trend lines. With so many to choose from, we will pick out the five most common. Then, we will explain how you can understand and use them to your advantage.
What Is A Trendline?
With so many graph trends types, we must clearly define a trendline before we go into any detail about the kinds of trend lines you can find on a live trading chart. Trading is a complex process that requires knowledge and experience to be successful.
One of the most critical tools traders use are trendlines, which help them identify potential entry and exit points in the market. Generally, most trend lines consider the price action over a specific period.
Different types of trendlines are varying graphical representations that indicate price movements up and down over a specific period. For example, some traders who use short-term strategies like scalping will zoom in on types of trend lines you’ll find over a 5-minute or 15-minute period.
However, day trading is another group of strategies altogether. One thing they have in common is that they will draw trends in graphs to ascertain an excellent point to enter and exit their trade.
Swing trading is one of the most common methods beginner traders use. Mainly as it is easier to understand and gives you a good idea of where to draw basic types of trend lines. These will be the first types of trend lines we will explore today.
What Is A Linear Trendline?
A linear graph is one of the clearest trend lines to commit to memory. It takes shape as on the chart below. Although there may be some slight dips in the price of an asset, if the overall price is gradually moving upwards over a certain period, this will constitute a linear trend line, as shown below.
The linear trend equation is as follows:
y = mx + b
X is the independent variable, y is the dependent variable, m is the slope of the line, and b is the y-intercept. You may hear traders talk about other patterns, such as triangle or head and shoulders patterns. Our insights page provides more information. However, it is best to learn the basics first, especially if you are a novice trader.
What Is A Exponential Trend Line?
One of the most commonly used types of trend lines is the exponential trendline. This type of graph is used to identify when a stock or other asset is likely to continue its current trend.
You can use exponential trendlines in short-term strategies, such as reversal trading and long-term trading strategies, many of which you can find in stock trading. Although there are other factors to consider when it comes to trading, these trend lines are solid indicators when combined with external factors such as a stable or positive overall economic sentiment.
As you can see in the above graph, the price of Bitcoin experienced exponential growth during the 2021 bull run. This was a period when many cryptocurrency companies capitalised on the considerable increase in the sector. This is one of the types of trend lines that deviates away from a linear trend line and accelerates in a specific direction.
What Is A Logarithmic Trendline?
The trend line equation for a logarithmic trendline is:
Y = m1*ln(X) + C
This may seem like a complex equation, and trend line definition math can be complicated. Therefore, we will show you a graph.
As you can see above, a logarithmic trendline is when a price experiences a sharp burst and then stagnates at that level for a considerable period. If there’s a negative linear trend at any stage, it invalidates this type of chart. You will often see logarithmic trendlines during an economic boom, such as the current situation in Guyana with their GDP.
What Is A Polynomial Trendline?
You can use a polynomial trendline when your data values fluctuate up and down. It is one of the trend lines you will often find in cryptocurrency due to its volatility, especially regarding specific strategies such as day trading.
The polynomial trendline equation is y=a+x(n) with the values:
a=the intercept
x=the explanatory variable
n=the multiplier of the polynomial (e.g. squared, cubed, etc.)
The shape of a polynomial trendline is shown below in this image:
As long as you have a large enough amount of information, the polynomial trend line graph is one of the types of trend lines that is often the most used. It is one of the line graph curves you can find many professionals using.
What Is A Power Trendline?
A power trend line is one of the types of trend lines that you can’t use if your information has zero or negative amounts. However, this is one of the most prominent types of trend lines that traders and analysts will use during a bull run. The equation is similar to the polynomial trend equation, as shown below:
Y = m1*X(m2)
Although it may look similar to the linear graph, it is comprised in a completely different way. You can see an example of a power trendline below.
Conclusion
We have only touched the tip of the iceberg today regarding types of trend lines. As a beginner, it is essential to familiarise yourself with chart analysis.
You do not need to imprint the formulas into your head. So long as you know the shape they take on a chart, this is the main component. We appreciate that these formulas are complicated, especially if you are not proficient in math. However, being able to develop a basic understanding is critical. As long as you know what to look for, you can build your knowledge about chart analysis and the types of trend lines you can identify.
There are several hundred crypto exchanges on the market currently. New ones continue to pop up as more coins are released, the number of which is above 20 000. So, it’s clear to see the range is enormous. Fortunately, we are here to narrow your search by focusing on five options for the best trading platform for crypto and what makes them exceptional.
So, what is the best trading platform for crypto? Well, this is quite an open-ended question. There are several hundred crypto exchanges on the market currently. New ones continue to pop up as more coins are released, the number of which is above 20 000.
So, it’s clear to see the range is enormous. Fortunately, we are here to narrow your search by focusing on five options for the best trading platform for crypto and what makes them exceptional.
What is a crypto trading platform?
A crypto trading platform (or a crypto exchange) is a business that offers a facility for trading digital currencies. Like an options or stock exchange, a crypto exchange connects buyers and sellers on a central platform.
Think of it like a ‘matchmaking service.’ Exchanges use an order book, a matching engine displaying a list of orders at different prices for each coin.
When you want to buy at a certain price, the platform will match your request with a sell order (and vice versa).
Once it has fulfilled this transaction, it will levy a small commission for making this trade.
Most crypto exchanges use a commission structure called the maker-taker system. A ‘maker’ fee refers to an order that adds to the order book, while a ‘taker’ fee refers to an order that removes liquidity from the order book.
This is charged as a percentage of your trading volume over a month; the higher this is, the lower the commissions. The industry average is 0.25% for maker fees and 0.20% for taker fees.
Of course, these are not only the costs to note when seeking the best platform for trading crypto. You should consider potential:
Network or gas fees (when receiving or sending coins through a particular blockchain)
Deposit and withdrawal fees (for non-crypto payment methods like cards and bank wire)
Staking fees (when you invest your coins in a staking program)
Most exchanges also provide an in-built wallet, where clients can hold their coins safely and use them for spot trading later.
Now, not all trading platforms are exchanges. We also have brokers that, like forex brokers, charge a spread instead of a maker/taker fee. The key difference between a broker and an exchange is the absence of an order book.
The broker sets the prices and orders are executed between them and the trader (rather than between buyers and sellers). Also, brokers cannot offer 24/7 trading like exchanges.
So, what are the key features to observe when looking for the best crypto platform for trading?
Top security: regulation, data encryption, identity verification, two-factor authentication, cold storage
Wide selection of coins: the best trading platform for crypto should also include newer tokens regularly.
Broad range of payment methods (crypto and fiat-based channels)
Reasonable fees(be mindful of any hidden charges)
Inclusion of a wallet
Best platform crypto trading: top 5 options
So, we’ve covered the basics. Now, let’s answer the question of ‘what is the best platform for trading crypto’ with 5 choices you can consider.
5. PrimeBit
Features:
Anonymous trading (no KYC needed)
8 crypto markets available
No minimum deposit
No deposit fees
0.02% maker fees / 0.05% taker fees
Perpetual futures with 1:200 max. leverage
Crypto-based deposits/withdrawals only
Built-in wallet
Email and live chat support
PrimeBit is a relatively new digital currency trading service from Saint Vincent and the Grenadines launched in 2019. It offers trading in crypto, stocks, metals, commodities and indices.
PrimeBit is the best trading platform for crypto when it comes to high leverage. You can gear your account up to 200x on their perpetual futures. What’s also unique with this platform is no identity verification or KYC (Know-Your-Customer) is needed.
So, you can get started with a name and email address. Therefore, in the true spirit of crypto, you remain anonymous.
Pros:
Offers some of the highest leverage in the industry
KCS utility token for trading discounts and other incentives
In-built wallet (which can also hold NFTs)
24/7 customer service (including live chat)
KuCoin, which dubs itself as ‘The People’s Exchange.’ is a large crypto exchange founded in 2017 in Singapore. The service is an all-in-one trading, derivatives and earning platform. It contains a host of exciting features like spot/margin trading, staking, lending, NFTs, mining pools, etc.
KuCoin allows for non-KYC trading, but withdrawal limits exist apply. The exchange has its own utility token, KCS, that offers trading discounts, dividends, offers and more.
Pros:
One of the largest crypto exchanges by trading volume
Impressive choice of coins available
Provides many interesting crypto-related services
Has utility token offering numerous incentives
Many trading types available
24/7 customer service
Cons:
Better suited for advanced investors
Higher fees for fiat-crypto trades
3. Coinbase
Features:
+500 crypto pairs
Crypto and fiat-based payment methods (cards, Paypal, ACH, bank wire)
Maker fees of 0-0.50%; taker fees of 0.04-0.50%
Staking available
Spot and futures trading available
Coinbase Visa® Card with spending rewards
Borrowing using Bitcoin collateral
In-built wallet (which can also store NFTs)
Email and phone customer support
Few can argue about Coinbase being the best crypto trading platform for US citizens (and even globally). The exchange is one of the oldest in existence, having started in 2012. However, while a massive entity, Coinbase is not as feature-rich as brands like KuCoin and Binance.
But, it offers enough services when it comes to trading coins and NFTs, spot and futures trading, and earning interest through staking.
Pros:
Publicly-traded company that’s over 10 years old
Regulated in the US
One of the largest crypto exchanges in trading volume
Broad choice of crypto pairs provided
Offers an in-built wallet
Staking and lending offered to earn rewards
Phone support available
Cons:
Known for high fees
No margin trading provided
2. OKX
Features:
+700 crypto markets available
0.08% maker and 0.10% taker fees
No minimum deposit
Crypto and fiat payment methods
Provides spot, margin (10x max leverage), perpetual swaps, futures (both 125x max leverage), and options trading
OKX is an innovative Seychelles-based crypto exchange founded in 2017. Like Coinbase, many consider it the best trading platform for crypto. But unlike Coinbase, OKX is an all-encompassing facility with several crypto services.
This includes spot, margin, options, futures, DeFi, mining and lending services, among other features. In addition, OKX has its own utility token, OKB, offering trading fee discounts, savings returns and other exclusive perks.
Pros:
Massive exchange by daily trading volume
Various customer support options
OKB utility token
Offers many trading types
No starting balance
Low trading fees
Cons:
Complex fee structure
1. Binance
Features:
+1600 crypto markets
Provides basic, classic, advanced, margin, OTC, and P2P trading
Maker and taker fees of 0%-0.10%
Crypto lending and staking
Liquidity farming
BNB utility token offers fee discounts and incentives
Mining pool
Built-in wallet for coins and NFTs
It was a close tie between Binance and OKX, but we consider the former the best crypto trading platform. Binance is the creation of famous Chinese entrepreneur CZ, who founded the company in 2017 in China.
By the start of 2018, Binance was the largest exchange globally and has consistently retained that status. Binance is also one of the few crypto trading platforms operating in the US.
Overall, Binance is a super-complete crypto trading service for all your needs, whether you’re a beginner or an expert.
Pros:
Has consistently ranked as the world’s largest exchange by volume
Several trading types offered
In-built wallet
BNB utility token
More expansive market selection compared to the other platforms
Reasonable trading fees
Cons:
More suitable for advanced investors
Conclusion
One massive advantage over markets like stocks (where the trading hours are limited) is that you can trade crypto 24/7. However, digital currencies offer many benefits, like freedom from the traditional finance system and decentralisation.
Still, as with any instrument, there are many risks with crypto. So, you must be as knowledgeable as possible to survive and thrive. Fortunately, you can learn more about cryptocurrencies with this guide for beginners here.
Spot vs margin trading: these are different branches of the same ‘tree’ in a financial market. In either case, a trader purchases or sells a financial asset at its current price and hopes to cash out later for a profit. Yet, margin adds something extra to the deal, a way in which you can bank far more than you usually could.
Spot vs margin trading: these are different branches of the same ‘tree’ in a financial market. In either case, a trader purchases or sells a financial asset at its current price and hopes to cash out later for a profit.
Yet, margin adds something extra to the deal, a way in which you can bank far more than you usually could.
This is the primary difference in spot trading vs margin trading. However, with risk management in mind, margin is necessary to magnify profits in the shortest period possible.
What is spot trading?
Spot trading describes buying or selling a financial market at its current value for ‘same time’ delivery or execution. This market can be anything like forex, stocks, metals, options, crypto, bonds, etc.
The current value (or the spot price) remains uniform regardless of where you trade the asset.
The main point to understand is that your trading platform executes at the current price after you’ve clicked ‘buy’ or ‘sell.’
Many spot markets involve taking ownership of the traded asset. For example, trading a stock through an exchange means owning the underlying shares. However, we also have spot trading through derivatives.
Here, instead of trading actual shares, you trade a ‘replica’ of the stock while being able to make or lose money with it as you would with the real stock.
So, we have spot trading through physical ownership (or digital ownership in the case of crypto) and derivatives.
Another key component is that spot trading is traditionally unleveraged. In simple terms, it means that you trade on a 1:1 basis. So, if a financial asset costs $1000, you must bring that amount to the table.
Back in the day (before the 21st century), leveraged trading wasn’t common for the average investor. Yet, once markets began branching into non-exchange trading, decentralisation allowed for more freedom and experimentation.
One of these changes was the availability of higher and higher margin.
What is margin trading?
Let’s look at the second part of our spot vs margin trading discussion. Margin is collateral or ‘loan’ offered by a broker to a trader allowing them to open a position much larger than their account balance.
We use leverage and margin interchangeably. Margin is the amount of money you need to open a leveraged position, while leverage is a term that describes having increasing trading power.
In spot trading, you trade on a 1:1 basis. However, depending on the market, you can ‘gear’ your account from a 1:2 to an unlimited ratio with margin.
Now, margin has been around for decades. The reason it’s so popular nowadays is due to capital access.
As a spot trader, you need to commit the total value of a financial asset, whether it costs $100, $10 000 or $100 000. Generally, investing in a market is expensive for the average Joe. So, margin drastically lowers the barrier to entry.
It’s pretty much the only incentive that brokers can offer their clients to trade with them (otherwise, they’d be out of business).
Let’s make an example of a leveraged trade in forex. Assume you wished to trade 2.5 standard lots EUR/USD pair at 1.06060.
Generally, a standard lot on this market is worth $100 000 (so 2.5 lots is $250 000). Let’s also assume that your broker offered a maximum of 1:500 leverage.
Of course, $250 000 to buy currencies is too much money for most people. Yet, 1:500 leverage means that you would only need $500 (250 000 / 500) to have the privilege of trading the same value.
Let’s say a trader decided to sell at the price of 1.06060. If this market fell 10 pips (where each pip is worth $10), this would result in a floating profit of $100.
Yet, if the pair went in the opposite direction, the trader would have a floating loss of $100. We can see that a $100 deficit is 20% of their equity ($500), which is substantial. This is why the cliché of leverage being a double-edged sword remains true.
Differences in spot vs margin trading
The primary distinction between spot vs margin trading is, of course, leverage. This naturally equates to varying degrees of risk. But, at the same time, it’s only the way for traders to make substantial returns.
Let’s go back to our previous example. A $100 profit on a $250 000 balance is a 0.4% increase. Yet, a $100 profit on a $500 account equals a 20% rise. Therefore, margin allows for higher growth with less capital invested.
Needless to say, we have to consider the downside. The higher the leverage, the greater the chances of blowing your account.
This is far less likely when you’re committing the full value of a position as you do with spot trading.
In our last example, if a trader didn’t apply a stop loss, a small 50-pip drop (worth $500) would result in a trader’s account going to zero.
But, the same $500 on a $250 000 account is only a drop in the ocean. A trader could withstand even further losses with this massive balance.
To summarise the differences in spot vs margin trading:
The capital requirements are higher on spot and lower on margin.
Leverage is not present with spot but available on margin
Conclusion: which you should between spot vs margin trading?
Earlier, we mentioned that margin is one of the main incentives brokers offer clients. Without this feature, the growth of any traded market is slower.
Due to economic pressures, most of us have no choice but to seek for the biggest returns in the shortest time possible.
Therefore, leverage is necessary to achieve this goal. However, it’s something you should use responsibly. Also, it doesn’t matter whether your leverage is 1:50 or unlimited. Traders are not obliged to utilize the entire ratio.
Spot trading is suitable for wealthier investors looking for slower growth or looking to own physical assets instead of trading derivatives. Also, it is simpler as you don’t have to calculate margin requirements for each position and deal with potential margin calls.
To summarise, spot trading is the easiest way to trade a financial security because of the instant settlement. Moreover, it’s the most accessible method for the average investor. But this is where the simplicity stops. Spot prices, like any markets, are driven by many variables that need to be studied.
Spot trades are a lot more common than most people think. For instance, it happens when someone exchanges their local currency for another through a forex transaction.
Or when a person goes to an exchange to buy their favourite cryptocurrency (check out our piece comparing the two instruments here).
As you can see, we can be spot traders across many capital markets. Here, we’ll look at the spot trading meaning in more detail.
What is spot trading?
Spot trading refers to trading a financial instrument for instant settlement at the current or spot price. So, in a nutshell, everything happens ‘on the spot’ without any future references. In many cases, this type of trading involves physical delivery or ownership of the asset in question.
For instance, crypto spot trading means owning the actual coin from an exchange you keep in a designated wallet.
In the case of forex, it would be receiving real currencies. As a crude example, if you went with US dollars to get euros at a forex dealer, you would obtain euros in cash. This, of course, can happen electronically, but the point is:
Spot trading accounts for the instrument’s current price, with the immediate transfer of funds.
You usually take ownership of that asset, which you can decide to keep or sell later.
Spot trading is different from futures trading (more on this later), where the delivery of the asset only happens at a later price and date.
Another critical component of spot trading is that you own the asset at its full value without leverage or margin (we go into the differences between the spot trading vs margin trading here).
We broadly classify spot trading into two types: OTC (over-the-counter) and exchange-based:
OTC: Over-the-counter describes a system where trading happens without an exchange. It consists of brokers that connect buyers and sellers on a private platform. Therefore, no third party (like an exchange) supervises everything that happens.
As a result, brokers have more freedom to offer less standardised products. Also, the spot prices through an OTC system are not exactly the same as those you’ll find with an exchange.
We use OTC when we’re not looking to own the financial asset in its physical form while looking to profit from it simultaneously. This is what we refer to as a derivative or CFD (contract for difference)
For instance, when you trade a forex pair from a broker, you don’t own the underlying currencies.
In the same context, spot trading crypto from a broker means that you have no digital possession of the coin.
However, you can make or lose money the same way if you exchange the same currencies through a bank (or buy the coin from an exchange).
Also, brokers are more accessible, and you can expect quicker settlement of your transactions.
Exchange: This represents how we buy and sell most financial assets (e.g., crypto, stocks, bonds, options, commodities, futures). The main exception of a non-exchange traded instrument is FX, which remains decentralized or OTC-based.
An exchange is a system of an organised market where trading happens on a public platform.
In the old days, this platform was a trading floor or physical location. But nowadays, most trading happens electronically.
The core benefit of an exchange is transparency. Because everything is centralized, traders can access the same information on the same platform. This also means you can see how orders are executed at different levels through a matching engine called an order book.
So, effectively, traders are dealing with each other. On the other hand, your orders are matched with a private institution through the OTC system. This can result in several counterparty risks. Also, exchanges are always regulated, unlike OTC dealers.
Another point worth mentioning is that some markets have duality in how we can buy or sell them. For instance, we can trade bonds, stocks, crypto, commodities, futures and indices on exchanges and brokers.
Alternatives to spot trading
Needless to say, there are different avenues to spot trading, namely futures trading and options trading.
Futures trading:
A future is a way of trading a market at a pre-determined value at a later expiry date. Traditionally, the purpose has always been to ‘lock in’ for something that will only be delivered in the future.
For instance, a corn producer may sell a corn futures contract now (after planting is done) for delivery in three months to secure a cheaper price. Yet, futures trading is also for speculators, not just hedgers.
This means there is no need to wait until expiry to close your position. Additionally, some traders may choose futures for features not available in the spot market.
For instance, leverage for crypto futures generally is higher than in the spot market; some FX traders can view useful exchange data they wouldn’t find with a FX broker.
Options trading:
An option is a financial derivative where you have the right (but not the obligation) to buy or sell a specific market at a certain price and expiry date.
Simply put, you can buy or sell but aren’t obligated to hold what you’ve bought or sold. The only price you pay is a premium if your prediction is wrong.
Options trading is like wagering or betting the value of an asset will be below or above a certain level (the ‘strike price’) within a set time limit.
Traders may choose to focus only on options or trade the options and spot markets at the same time for hedging purposes. So, one may take a sell position on one and a buy position on the other.
Benefits of spot trading
Let’s explore the several reasons why people choose to become spot traders:
Simplicity: The concept of spot is straightforward. Traders buy and sell at the immediate price with instant settlement, meaning there is no waiting. This is beneficial if you’re selling a market for a profit because you’re confident that the closing price is final.
The concept of spot trading is much simpler than futures trading since you don’t have to account for later events or periods.
No leverage involved: This benefits more risk-averse investors or traders. Let’s look at a popular spot market like forex. FX has the highest margin rates across all instruments.
However, the failure rate is quite high because traders misuse the leverage, leading to substantial losses.
Yet, most spot trading is unleveraged. This doesn’t mean that you can lose money. But, the loss rate is slower, allowing you to remain in the market longer.
Suitable for investing: This point extends from the last line. Most spot trading involves taking ownership of a financial asset. For example, buying stocks from an exchange or even buying gold or silver from a dealer.
When the market is in a downturn, you can withstand these periods without worrying about margin, which can wipe you out faster. Also, some people prefer owning actual assets instead of derivatives.
So, the spot market is suitable for this purpose. Yet, it is also a good fit for short-term trading when ownership isn’t necessary.
Drawbacks of spot trading
Of course, there are downsides to this trading style:
Often needs more capital: In many cases, you need more money in your account for a spot trade. Again, this is due to the lack of leverage. Margin allows investors to trade larger positions with a smaller balance.
Without leverage, you need to have the full value of the position as capital. For instance, a standard lot on EUR/USD is generally worth $100 000. However, leverage can allow traders to trade the same position with as little as $1000 in their equity.
Physical ownership: Of course, this doesn’t apply to all markets. Yet, it’s worth considering if you’re an investor looking to own actual assets, e.g., physical gold, bonds, coins, etc.
A physical asset will need extra care and attention. For instance, if you own gold, there are more costs involved in storage and insurance.
Consider another example. When you buy a cryptocurrency, you might need to consider a ‘cold’ wallet (a wallet not connected to the internet) to protect yourself against online threats. This understandably will cost you extra.
So, in many cases, trading derivatives in the spot market is a better and less tedious method.
Conclusion
To summarise, spot trading is the easiest way to trade a financial security because of the instant settlement. Moreover, it’s the most accessible method for the average investor.
But this is where the simplicity stops. Spot prices, like any markets, are driven by many variables that need to be studied.
Generally, because of the capital requirements, you may need to consider margin to increase your bottom line. Yet, ensure you understand the risks involved, so you don’t ‘lose your shirt.’
Essentially, stocks represent ownership of companies, while bonds are loans made to governments and large businesses. The second key distinction is how money is made or lost. Stocks rely on a company’s price depreciation or appreciation, while bonds rely on interest.
Stocks vs bonds: these are two tried-and-tested markets that have been around for eons, compared to forex and the more recent crypto. But what’s the difference between stocks and bonds?
Essentially, stocks represent ownership of companies, while bonds are loans made to governments and large businesses. The second key distinction is how money is made or lost. Stocks rely on a company’s price depreciation or appreciation, while bonds rely on interest.
Let’s uncover the stocks vs bonds differences in more detail here.
What are stocks?
Let’s look at the first part of our stocks vs bonds discussion. Stocks (equities or shares) are financial instruments denoting fractional ownership of a traded company. Most stocks are traded on stock exchanges (check out their trading hours here), a marketplace for businesses to issue their shares.
The purpose is for the company to raise external funding from private investors. Once they meet the requirements for being listed, they determine how much equity they will offer to shareholders.
This portion is sold as shares at a set price during an initial public offering (IPO), the first official day the underlying company is listed.
Based on several technical and economic factors, the stock will decrease and increase in value over time. This means that investors can profit by buying and selling.
Here is a candlestick chart of Tesla, one of the most popular stocks globally.
Some shares offer shareholders dividends (on top of any profits from price appreciation), a portion of the company’s profits.
Another method of trading shares is through derivatives or CFDs (contracts for differences). This means you don’t own the actual stock but still have the benefits of trading its price for profits and losses.
What are bonds?
“The name’s Bond, James Bond!” Puns aside, what is a bond? Bonds are loans offered by investors to various entities, most commonly corporations and governments. It’s a way for ordinary individuals to become lenders for large institutions in return for interest payments.
Bonds are another method of financing away from traditional banks. Governments always need money to fund infrastructure and daily operations. Similarly, a company requires cash to grow their business through hiring employees, buying equipment, investing in property, etc.
So, a bond is like a crowd-funded debt instrument allowing thousands of investors to become lenders.
The borrower or issuer (the entity needing the loan) creates a bond with details of the loan term and the frequency of interest payments. Like traditional credit, there is a maturity date where the principal plus interest should be paid to the lender.
Interest yields (known as coupon rates) worldwide range from 0.5% to 14%. The longer the loan term, the higher the rate is generally.
The most popular bond in the world is the 10-year Treasury note (US10Y) issued by the American government. It’s a bond paying fixed interest every six months for a decade.
Now, as with stocks, you don’t have to own the actual bonds. Instead, you can trade the instrument as a derivative. There are many bond markets (aside from US10Y), like the Euro Bund (EUBUND) and UK Gilt (UKGILT).
Below is an image of a chart for the US10Y yields since 1912.
Like stocks, traders can analyse these instruments using technical and fundamental analysis.
Stocks vs bonds: key differences
By now, it should be clear what the purpose of each market is. So, let’s look at the key differences between stocks and bonds investments.
Purpose: The objective is the first obvious contrast between bonds vs stocks. A stock is an investment in a listed company. On the other hand, a bond is a loan made to corporations and government entities.
Return type: This difference is perhaps the most significant. Returns from stocks come by way of capital gains. This means that you only make money if the price is lower than what you sold it for or higher than what you bought it for.
Meanwhile, bonds are fixed-income investments. The return is, in theory, guaranteed in the form of interest payments. It’s one reason why experts consider bonds as the safer investment.
Note: interest payments don’t apply if you’re trading a bond as a derivative or CFD.
Risk: This is an extension of the last difference. Generally, there is more risk involved (but higher returns) with stocks, given the number of factors that can influence their prices. Bonds are the ‘safer’ options because they have predictable returns.
Trading arena: Traditionally, the trading of most stocks happens on exchanges like the New York Stock Exchange and NASDAQ. Contrarily, many bonds are traded ‘over the counter.’ This means the trading doesn’t happen on a public platform but rather through brokers.
Note: Brokers are financial services providers offering derivatives. So you can trade stocks or bonds with them.
Benefits and drawbacks of stocks
So why would you consider stocks over bonds? (and why you may decide against it)
Pros
Better returns: The historical performance of stocks far surpasses that of bonds. Mega corporations like Amazon, Apple, and Microsoft have annualized returns above 20%. This excludes individual yearly performances, which, in some cases, have exceeded 100%.
These are just the blue-chip shares. Other lesser-known stocks have performed way better. Meanwhile, bonds are slow-growing assets. As previously mentioned, bonds pay between 0.5% and 14% interest yearly.
The US 10-year treasury bond has averaged around 3.7% in the last few years, a far cry from stocks.
Broader scope: There are tons of different stocks you can follow, like blue-chip, growth, dividend, defensive and penny stocks, among others. On the other hand, the selection of bonds is limited.
More accessible: The average person will know what shares are, but less so on bonds. Also, you need to invest far more money in bonds to achieve a fraction of stock returns that you can receive with less capital.
Cons
More risk: The most apparent downfall with equities is, of course, volatility. Although stocks have performed far better, there are many periods where they haven’t. So, this market is less stable compared to bonds.
Benefits and drawbacks of bonds
So why would you consider bonds vs stocks? (and why you may decide against it)
Pros
Stable returns: Bonds are less volatile than stocks, meaning their performance is more reliable. If you invest in bonds (not as a CFD), your interest payments are almost guaranteed because the likelihood of default has been low historically.
Cons
Weaker performance: Despite having better stability, the returns are measly compared to equities. Also, it’s a myth that bonds are risk-free. Aside from the rare possibility of defaulting, interest rates fluctuate. Subtle risks like inflation can lead to losses or investors making less money than expected.
Less accessible: Unless you’re trading the bond as a derivative, you need more funds to invest in bonds than stocks. Also, bonds are less popular, making them harder for the average person to understand.
Conclusion
When looking at stocks vs bonds, it’s quite telling that the bond market is technically larger in value than the equities market. After all, debt is what fuels most economies. Yet, despite this fact, stocks have more benefits.
Like bonds, experts have long considered shares among the best long-term investments. The only difference is the performance is far superior. This is because they increase as companies become more valuable, boosting their bottom line.
On the other hand, bonds are not income-generating assets but simply interest payments. Still, many investors choose bonds to achieve better returns than they would from a savings account. Also, it is common for them to invest in stocks simultaneously.
Here, they have the potential to achieve multi-bagger returns while making ‘slow money’ from bonds; double impact, if you will!
It will work to your advantage if you know how many tradings in a year exist. However, knowing how it differs between markets and what public holidays are observed are more profound pieces of knowledge that will assist your trading strategy further.
If you are a professional or part-time trader, one of the most enticing aspects of trading is that you can trade across various assets. Some different strategies and skills make specific forex traders better than others. Irrespective of the tools they use or if they learn that controlling negative emotions is imperative for a successful strategy. All of these components are just supplementary instruments to assist you.
Likewise, some professionals specialise in trading commodities such as gold, steel, silver and oil. On the other hand, some professional traders, usually those working for prestigious institutions and investment banks such as Goldman Sachs, will be experts across several different markets.
There are several trading days in a year. Since each market operates differently, the number of trading days differs annually. Today we will examine the number of stock trading days in a year and other markets, such as how many forex trading days in a year.
In addition, you have different markets, such as commodities and cryptocurrency. Hopefully, by the end of today’s article, you will completely understand how many trading days in a year there are, irrespective of the market.
How Many Stock Trading Days Are There In A Year?
If you’re a beginner in stock trading, it is essential to learn the basics. Once you have committed some basic stock trading facts to memory, you can build your knowledge around the topic.
The United States has the most significant trading markets. The NASDAQ and NYSE have just over 250 trading days in a year. In addition, the stock market is closed on weekends and is open between business hours, Monday to Friday.
Although there is more that can move the market that happens over the weekend or outside trading hours, this will not impact the price properly until the trading day begins again on the next available day.
Alongside the weekend, there are also public holidays that are observed on the trading floor in the United States, which are as follows
January 1st — New Year’s Day
January 20th — Martin Luther King Jr. Day
February 17th — Presidents’ Day
April 10th — Good Friday
May 25th — Memorial Day
July 4th (or the closest calendar day if it falls at the weekend)
September 7th — Labor Day
November 26th — Thanksgiving Day
December 25th — Christmas Day
The easiest way to remember how many stock market trading days in a year there are simply subtract these days and weekends.
So Traders Get Time Off?
Technically, yes, they do. However, professional traders may argue that the market never sleeps. They’re always keeping their eye on news that could shift the market. Given the global nature of trading, it is hard to switch off.
The fact the world is far more interconnected than it used to be because of the internet is another factor. News travels a lot quicker than it used to before the internet, and a lot of traders get less time off than the schedule suggests.
Managing Risks
Presumably, if you want to find out how many stock trading days there are in a year, you will be an active trader or looking to enter the trading world. Therefore, managing risks is vital as it allows you to mitigate any losses and keep trading.
Your capital is always at risk. So even if you have a good strategy, you could eventually lose all your money if you do not combine it with high-quality risk management.
Ultimately, there are two ways to manage your risk. First, controlling negative emotions is vital, as discussed in the opening section. So long as you use stop loss and take profit limits, you are in a position where you don’t need to glue yourself to a chart. In addition, you do not need to let negative emotions or revenge trading enter your psychology.
Another way traders and investors manage risk is by using a dollar cost averaging technique. This means that you continue to buy your asset as it depreciates in value, so your average entry price is lower. This is a more effective tool for long-term strategies such as swing trading. However, it also doesn’t apply to more specialist instruments like options.
However, if you maintain an intelligent strategy to manage risk effectively, you are in a much better position than traders who don’t. Any trader with no risk management is essentially gambling away their savings.
How Many Forex Trading Days In A Year
It is good to understand a range of markets. Even though you may prefer commodities or forex, having a basic grasp of what drives other markets is a good idea. Understanding the total means knowing that each market has a different amount of activity.
Remembering that forex is the world’s biggest trading market is vital. With trillions of transactions over 24 hours, forex can offer lucrative returns for traders who know where to look.
Just because it is the biggest market in the world doesn’t mean that’s the only difference. Given that there are so many trading days in a year is one thing, but knowing the best time to trade your chosen foreign currency is a different story.
Forex has the same amount of trading days in a year as in stocks. Given that it’s more of an international marketplace, there is less onus or weight carried on public holidays.
However, as currencies are traded across multiple timezones in New York, Sydney, London and Tokyo, you can see big spikes at any time of the day. Therefore, following the news, especially about the economy and economic policies, is vital. Once you grasp the underlying factors that cause volatility and price action, this is one box you can tick.
How Many Trading Days Are There In A Typical Year?
Knowing how many trading days there are in a typical year is crucial. Except for leap years, this number is usually 252. This is because stocks follow a more rigid protocol within standard business hours. Forex is more lucid, and you can trade 24 hours a day during the week. Ultimately, the amount of trading days per year remains the same.
Other variables to consider when trading forex include deciding on the best platform to use, whether you should use a spread, listening to some of the best tips, or you can explore specific strategies such as the Fibonacci sequence.
How Many Cryptocurrency Trading Days In A Year?
Technically speaking, you can trade cryptocurrency 24/7, 365 days a year. This is partly why it is widely known as the most volatile asset you can trade. You can apply other techniques and look to enact them on the best trading days in a year. The most volatile days are often during economic announcements in major world economies.
You can use crypto trading bots if you prefer a hands-off approach to cryptocurrency trading. However, ensuring you understand cryptocurrency is the most critical component. Given that the market doesn’t shut down at any stage of the year can be used as a positive and negative. Although public holidays and weekends will see less volume, the news still causes the price to fluctuate heavily over Saturdays and Sundays.
Forex is a more established market when compared with crypto. As a result, it is a more significant marketplace, and although it has fewer trading days in a year, it deals with much higher amounts of trading volume.
The cryptocurrency market has violently crashed several times over the last decade. If there is a substantial global economic crash, all markets are impacted. Whether the forex market can crash, given its size of it, is a different question entirely.
Even if it did, plenty of traders have made a lot of money in times of crisis. Of course, you can still trade forex or any other asset during a recession, but there tends to be less volume, given that people have less money to spend.
Conclusion
If you’re looking for an answer to how many trading days in a year there are, then as you can tell from today’s article, there are several answers. All of these answers are correct. Weekdays see the most activity across all of these markets. This is irrespective of whether it is the forex, stock, or commodities markets.
Even though we didn’t touch on the commodities market today, it also has 252 trading days per year. So remember, if anybody asks you how many trading days in a year there are, ask them to specify which market. Learning the basics is a great foundation. Once you know the facts and start to understand the markets, you can trade in your chosen asset class.
