Stocks Trading - Advantages and Disadvantages

What is Stocks Trading?

Companies throughout the world issue new stock shares every day. They do so to raise capital in order to invest in the business. Once stock shares have been issued the public is free to buy and sell those issues through a stock broker. As the supply and demand for the shares changes so too does the price. Changing stock prices means opportunities to profit for a trader.

With the arrival of the internet it is now possible to buy and sell stocks relatively cheaply and almost instantly. This, coupled with increased volatility has given rise to more and more people trading stocks rather than just buying and holding them for years.

Advantages of Stocks Trading

Better returns. Actively trading stocks can produce better overall returns than simply buying and holding.

Huge Choice. There are thousands of stocks listed on markets in the US (such as the New York Stock Exchange and Nasdaq) and around the world. There is always a stock whose price is moving - it's just a matter of finding them.

Familiarity. The most traded stocks are in the largest companies that most of us have heard of and understand - Microsoft, IBM, Cisco etc.

Disadvantages of Stocks Trading

Leverage. With a margined account the maximum amount of leverage available for stock trading is usually 4:1. Meaning a $25,000 could trade up to $100,000 of stock. This is pretty low compared to forex trading or futures trading.

Pattern Day Trader Rules. Requires at least $25,000 to be held in a trading account if the trader completes more than 4 trades in a 5 day period. No such rule applies to forex trading or futures trading.

Uptick Rule on Short Selling. A trader must wait until a stock price ticks up before they can short sell it. Again there are no such rules in forex trading or futures trading where going short is as easy as going long.

Need to Borrow Stock to Short. Stocks are physical commodities and if a trader wishes to go short then the broker must have arrangements in place to 'borrow' that stock from a shareholder until the trader closes their position. This limits the opportunities available for short selling. Contrast this to futures trading where selling is as easy as buying.

Costs. Although online trading costs for stock trading are low they still add considerably to the costs of daytrading. Online futures trading is about 1/4 of the cost for the equivalent value. In the UK 0.5% stamp duty is also levied on all share purchases making trading virtually impossible - Hence the popularity of spreadbetting.

Tim Wreford runs Online Futures Trading, a website that provides information and resources for traders. Tim also provides a free day trading system, the results of which are updated daily on the site.

MORE RESOURCES:

Currency Trading Markets Remain Highly Correlated to Dow Jones ... - Daily FX

table border=0 width= valign=top cellpadding=2 cellspacing=7trtd valign=top class=jfont style=font-size:85%;font-family:arial,sans-serifbrdiv style=padding-top:0.8em;img alt= height=1 width=1/divdiv class=lha href=http://news.google.com/news/url?sa=Tct=us/0-0fd=Rurl=http://www.dailyfx.com/story/bio1/Forex_Markets_Increasingly_Correlated1227030341561.htmlcid=1271919444ei=mIYnSdq6DaDM8ASs3vkQusg=AFQjCNEs5-3yXIZV-U4pzrUg4ubecpz2aQbCurrency Trading/b Markets Remain Highly Correlated to Dow Jones b.../b/abrfont size=-1font color=#6f6f6fDaily FX,nbsp;NYnbsp;-/font nobrNov 18, 2008/nobr/fontbrfont size=-1bCurrency trading/b markets continue very highly correlated to broader risky asset classes, as the common theme of financial market deleveraging creates strong b.../b/fontbrfont size=-1a href=http://news.google.com/news/url?sa=Tct=us/0-1fd=Rurl=http://www.dailyfx.com/story/dailyfx_reports/cross_markets_data_reaction/Forex_Markets_Increasingly_Correlated1227030341561.htmlcid=1271919444ei=mIYnSdq6DaDM8ASs3vkQusg=AFQjCNGJaefLhqZd69bixCOyZFV9I0wPmQbCurrency Trading/b Markets Remain Highly Correlated to Dow Jones b.../b/a font size=-1 color=#6f6f6fnobrDaily FX/nobr/font/fontbrfont class=p size=-1a class=p href=http://news.google.com/news?sourceid=navclientie=ISO-8859-1rls=GGLG,GGLG:2005-22,GGLG:enncl=1271919444hl=ennobrall 6 news articles/nobr/a/font/div/font/td/tr/table

Forex Expo promotes currency trading as alternative to bourse - Kuwait Times

table border=0 width= valign=top cellpadding=2 cellspacing=7trtd width=80 align=center valign=topfont style=font-size:85%;font-family:arial,sans-serifa href=http://news.google.com/news/url?sa=Tct=us/1i-0fd=Rurl=http://www.kuwaittimes.net/read_news.php%3Fnewsid%3DODI5MDA4NzAzcid=0ei=mIYnSdq6DaDM8ASs3vkQusg=AFQjCNGk4RQQX6vbWgjmsbTj1BROK1VH6Aimg src=http://news.google.com/news?imgefp=2wR1la0ZiX8Jimgurl=www.kuwaittimes.net/upload/img_pict/local9981b4.jpg width=80 height=54 alt= border=1brfont size=-2Kuwait Times/font/a/font/tdtd valign=top class=jfont style=font-size:85%;font-family:arial,sans-serifbrdiv style=padding-top:0.8em;img alt= height=1 width=1/divdiv class=lha href=http://news.google.com/news/url?sa=Tct=us/1-0fd=Rurl=http://www.kuwaittimes.net/read_news.php%3Fnewsid%3DODI5MDA4NzAzcid=0ei=mIYnSdq6DaDM8ASs3vkQusg=AFQjCNGk4RQQX6vbWgjmsbTj1BROK1VH6AForex Expo promotes bcurrency trading/b as alternative to bourse/abrfont size=-1font color=#6f6f6fKuwait Times,nbsp;Kuwaitnbsp;-/font nobrNov 20, 2008/nobr/fontbrfont size=-1By Dana Khraiche, Staff writer KUWAIT: bCurrency trading/b has its ups and downs. Recently, one of Kuwait#39;s largest lenders, Gulf Bank suffered a major crisis b.../b/font/div/font/td/tr/table

Dollar Posts Weekly Gain as Stock Plunge Spurs Haven Demand - Bloomberg

table border=0 width= valign=top cellpadding=2 cellspacing=7trtd width=80 align=center valign=topfont style=font-size:85%;font-family:arial,sans-serifa href=http://news.google.com/news/url?sa=Tct=us/2i-0fd=Rurl=http://business.maktoob.com/NewsDetails-20070423196865-Dollar_euro_hold_in_narrow_ranges_as_prospects_darken.htmcid=1272025713ei=mIYnSdq6DaDM8ASs3vkQusg=AFQjCNGKkMAFeYsQo0EIw22E2U_rbk5nWgimg src=http://news.google.com/news?imgefp=U06rm877j9MJimgurl=business.maktoob.com/BusinessImages/News/20070423196865/Feature.jpg width=80 height=48 alt= border=1brfont size=-2Maktoob/font/a/font/tdtd valign=top class=jfont style=font-size:85%;font-family:arial,sans-serifbrdiv style=padding-top:0.8em;img alt= height=1 width=1/divdiv class=lha href=http://news.google.com/news/url?sa=Tct=us/2-0fd=Rurl=http://www.bloomberg.com/apps/news%3Fpid%3D20601101%26sid%3Daynd4D5s4GW0%26refer%3Djapancid=1272025713ei=mIYnSdq6DaDM8ASs3vkQusg=AFQjCNHymwuwDe-ccIMHkAzppgL0rg1__QDollar Posts Weekly Gain as Stock Plunge Spurs Haven Demand/abrfont size=-1font color=#6f6f6fBloombergnbsp;-/font nobr6 hours ago/nobr/fontbrfont size=-1“It’s all about risk in this emotional market,” said Jacob Oubina, a currency strategist at FOREX.com, a unit of online bcurrency trading/b firm Gain Capital b.../b/fontbrfont size=-1a href=http://news.google.com/news/url?sa=Tct=us/2-1fd=Rurl=http://www.freshplaza.com/news_detail.asp%3Fid%3D33536cid=1272025713ei=mIYnSdq6DaDM8ASs3vkQusg=AFQjCNE88oHMFQxeuLkB3qMJTSxH52tPZAJapan: Yen Gains on Speculation Investors Sold High-Yielding Assets/a font size=-1 color=#6f6f6fnobrFreshPlaza/nobr/font/fontbrfont size=-1a href=http://news.google.com/news/url?sa=Tct=us/2-2fd=Rurl=http://www.bloomberg.com/apps/news%3Fpid%3D20601080%26sid%3DaaniNnROZMyE%26refer%3Dasiacid=1272025713ei=mIYnSdq6DaDM8ASs3vkQusg=AFQjCNFB5VPXwJXAy5Lcti59lMRstUfPwAYen Falls on Speculation Japan Investors Buying Overseas Assets/a font size=-1 color=#6f6f6fnobrBloomberg/nobr/font/fontbrfont size=-1a href=http://news.google.com/news/url?sa=Tct=us/2-3fd=Rurl=http://www.bloomberg.com/apps/news%3Fpid%3D20601080%26sid%3DawKTJEegbYqQ%26refer%3Dasiacid=1272025713ei=mIYnSdq6DaDM8ASs3vkQusg=AFQjCNEtqluKDeNL4quAAJWQFlIY1CaUDAAustralian, New Zealand Dollars Decline as Stocks Head Lower/a font size=-1 color=#6f6f6fnobrBloomberg/nobr/font/fontbrfont size=-1 class=pa href=http://news.google.com/news/url?sa=Tct=us/2-4fd=Rurl=http://www.bloomberg.com/apps/news%3Fpid%3D20601101%26sid%3DaPSn_slQsg7Y%26refer%3Djapancid=1272025713ei=mIYnSdq6DaDM8ASs3vkQusg=AFQjCNFORnNnKnqbnSafmSMWdMB9CgLBNwnobrBloomberg/nobr/anbsp;- a href=http://news.google.com/news/url?sa=Tct=us/2-5fd=Rurl=http://www.bloomberg.com/apps/news%3Fpid%3D20601101%26sid%3Da03xt54_wyoo%26refer%3Djapancid=1272025713ei=mIYnSdq6DaDM8ASs3vkQusg=AFQjCNFefGUJN633Wdc6iETPdgrgfvwJywnobrBloomberg/nobr/a/fontbr/font class=p size=-1a class=p href=http://news.google.com/news?sourceid=navclientie=ISO-8859-1rls=GGLG,GGLG:2005-22,GGLG:enncl=1272025713hl=ennobrall 344 news articles/nobr/a/font/div/font/td/tr/table

WSJ(11/11) Currency Trading: Bad Crop: Commodity Currencies - Alibaba News Channel

table border=0 width= valign=top cellpadding=2 cellspacing=7trtd width=80 align=center valign=topfont style=font-size:85%;font-family:arial,sans-serifa href=http://news.google.com/news/url?sa=Tct=us/3i-0fd=Rurl=http://afp.google.com/article/ALeqM5iYMHHytZrD2Bzt6qsdHRf0I96vBgcid=1268745902ei=mIYnSdq6DaDM8ASs3vkQusg=AFQjCNGRbkNZGdzWXeLdR3wun_PQv-L5EAimg src=http://news.google.com/news?imgefp=UY8LjYPyz4MJimgurl=afp.google.com/media/ALeqM5iNSpLW4XVwVpiuBZSBjCL2fcJR6g width=65 height=80 alt= border=1brfont size=-2AFP/font/a/font/tdtd valign=top class=jfont style=font-size:85%;font-family:arial,sans-serifbrdiv style=padding-top:0.8em;img alt= height=1 width=1/divdiv class=lha href=http://news.google.com/news/url?sa=Tct=us/3-0fd=Rurl=http://news.alibaba.com/article/detail/asia/100021689-1-wsj%25252811%25252F11%252529-currency-trading%25253A-bad-crop%25253A.htmlcid=1268745902ei=mIYnSdq6DaDM8ASs3vkQusg=AFQjCNFL5E0Pzysl3aZU9slH1hcD6H7gnAWSJ(11/11) bCurrency Trading/b: Bad Crop: Commodity Currencies/abrfont size=-1font color=#6f6f6fAlibaba News Channel,nbsp;NEW YORKnbsp;-/font nobrNov 11, 2008/nobr/fontbrfont size=-1In currency markets gripped by turmoil, investors have targeted one group for special punishment: big commodity exporters. This cluster includes the b.../b/fontbrfont size=-1a href=http://news.google.com/news/url?sa=Tct=us/3-1fd=Rurl=http://afp.google.com/article/ALeqM5iYMHHytZrD2Bzt6qsdHRf0I96vBgcid=1268745902ei=mIYnSdq6DaDM8ASs3vkQusg=AFQjCNGRbkNZGdzWXeLdR3wun_PQv-L5EAEuro firms against dollar, pound sinks amid credit turmoil/a font size=-1 color=#6f6f6fnobrAFP/nobr/font/fontbrfont size=-1a href=http://news.google.com/news/url?sa=Tct=us/3-2fd=Rurl=http://www.theaustralian.news.com.au/business/story/0,28124,24616765-5001942,00.htmlcid=1268745902ei=mIYnSdq6DaDM8ASs3vkQusg=AFQjCNEtGA9DvF8nNvmEuiEb6k-5fdwoGQAn investment class that is still thriving/a font size=-1 color=#6f6f6fnobrThe Australian/nobr/font/fontbrfont class=p size=-1a class=p href=http://news.google.com/news?sourceid=navclientie=ISO-8859-1rls=GGLG,GGLG:2005-22,GGLG:enncl=1268745902hl=ennobrall 224 news articles/nobr/a/font/div/font/td/tr/table

The view from MIT#39;s business school dean - BusinessWeek

ProSignal Inc. Releases a Fully Automated Online Forex Currency ... - MarketWatch

Hedge your bets with currency trading - Telegraph.co.uk

table border=0 width= valign=top cellpadding=2 cellspacing=7trtd width=80 align=center valign=topfont style=font-size:85%;font-family:arial,sans-serifa href=http://news.google.com/news/url?sa=Tct=us/6i-0fd=Rurl=http://www.telegraph.co.uk/finance/personalfinance/investing/3384919/Hedge-your-bets-with-currency-trading.htmlcid=1267279033ei=mIYnSdq6DaDM8ASs3vkQusg=AFQjCNEZc8vNLMxMdxjflqx1KYdt5-LlYgimg src=http://news.google.com/news?imgefp=O1NqIE60ARwJimgurl=www.telegraph.co.uk/telegraph/multimedia/archive/01107/PF-brooklyn-bridge_1107895c.jpg width=80 height=50 alt= border=1brfont size=-2Telegraph.co.uk/font/a/font/tdtd valign=top class=jfont style=font-size:85%;font-family:arial,sans-serifbrdiv style=padding-top:0.8em;img alt= height=1 width=1/divdiv class=lha href=http://news.google.com/news/url?sa=Tct=us/6-0fd=Rurl=http://www.telegraph.co.uk/finance/personalfinance/investing/3384919/Hedge-your-bets-with-currency-trading.htmlcid=1267279033ei=mIYnSdq6DaDM8ASs3vkQusg=AFQjCNEZc8vNLMxMdxjflqx1KYdt5-LlYgHedge your bets with bcurrency trading/b/abrfont size=-1font color=#6f6f6fTelegraph.co.uk,nbsp;United Kingdomnbsp;-/font nobrNov 5, 2008/nobr/fontbrfont size=-1Unlike stocks and bonds, not all currencies can fall at the same time. Here#39;s how to play the market. By Rosie Murray-West If you are going on holiday to b.../b/font/div/font/td/tr/table

Movers: Citi, GM, GAP, Dell, Wal-Mart - BusinessWeek

Runaway FX turnover growth tamed by crisis - guardian.co.uk

Currency Trading Strategies from DailyFX+ Prove Strongly ... - Daily FX

Currency-Trading - Google News

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