Experienced investors always go by the rule that says “Don’t put all your eggs in one basket”. It means that diversification of funds between different markets and assets helps to maximize your profit and minimize your risks.
FBS allows you to profit not only from currencies and commodities, but also from trading stocks of big US companies.
A stock or share is a type of security that signifies proportionate ownership in the issuing corporation. In other words, if you own a stock of Apple Inc., it means that you own a very small part of the iPhone maker. Traders buy and sell stocks of public companies. As a result, stock prices move up and down creating fantastic trade opportunities.
What are CFDs on stocks and why trade them
Although it’s possible to make a lot of money by buying and selling stocks, the actual process is not that simple. To start trading stocks you will need to fill in a lot of documents and invest an ample amount of funds. However, there’s a simple solution that will allow you to combine the best features of stock market with the features that are typical for currency trading. This solution is called CFD (Contracts for Difference).
CFD is a special type of contract based on the price of an underlying asset (in this case, on the price of a particular stock). It allows traders to benefit from the difference between the entry price of a trade and the exit price.
Example. If you open a buy trade on the stock of Tesla at $300 with 1 lot as a volume and the price goes up to $350, you will earn $50 (without taking into consideration commission). With leverage of 1:10 you won’t need the entire amount of $300 to open this trade: the margin that will be set aside by the broker to cover your position will equal to just $30. In you open a bigger trade size in lots, your potential profit on the same movement of the price will be bigger. The same will be true about the loss if the market turns against you, so always remember to have the proper risk management in place.
As you can see from the example above, stock CFDs let you experience the joy of making bets on stock prices without the burden of physical transference of the stocks from seller to buyer.
All in all, CFDs have the following advantages:
- You can open both buy and sell trades in stock CFDs, while traditional stocks allow to profit only on rising prices.
- Stock CFDs are traded on margin, so that you can have an additional leverage compared to the purchase of an underlying stock itself.
- You can enjoy both currency and stock trading in a familiar interface of MetaTrader.
What drives stock prices?
Stock CFDs have the same price charts as the underlying traditional stocks. To make money on stock prices you will need to set up MetaTrader 5.
The information about stock prices arrives to MT5 directly from American stock markets. As a result, if you open an MT5 account with FBS and install this program on your computer or smartphone, you will be able to trade stocks just like you trade currencies. All the knowledge about technical analysis you already have will be just as useful as for Forex trading.
Fundamental factors that drive stock prices are, however, be different. The dynamics of a stock depends on the financial results and other news related to that particular company. FBS team monitors the key stock news and provides analysis at the company’s website, so that traders can always earn money on dynamic stock prices. Moreover, once in a quarter companies release earnings and revenue. These publications lead to immense swings in stock prices and create superb profit opportunities for all stock CFD traders.
To start trading stocks you need to open an MT5 account, download and install this software and login to your account. After that, perform analysis and start making money!
How to download MT5 and open an MT5 account
Below you will find the simple steps for setting up an MT5 account.
Step 1. Visit your personal area at FBS website. Click “Open account” at your dashboard.
In the menu “Account type”, choose “Cent MT5” or “Standard MT5” and press the “Open account” button. You will then get the number of your new account and your trading password.
Step 2. Download MT5 either from your personal area or the “Trading” section of the website menu. Install the software to your computer or mobile phone.
Step 3. Login to MT5 using the account information you got in Step 1. The login process is successful, when you see a green icon with the speed of your Internet connection in the bottom right corner of the trading platform.
Open the “Market watch” window, right-click and choose “Show all”. You will be able to scroll through the list of assets available for trading and choose the stocks you want to trade. Contract specifications will let you discover the key information about these CFDs.
Start earning on stocks
The leverage for trading stocks with FBS is 1:10. Stock trading in MT5 is available from 16:30 to 23:00 MT time on weekdays.
Notice an important thing about commission: when you open a trade, you won’t see it in the “Trade” tab. When you close the trade, however, commission will be shown in the account history.
Remember that before you start trading with real money, you can always practice on demo account. For that purpose, choose the “Demo” tab in dashboard of the personal area and then click “Open account”.
Example of a stock trade
Let’s consider the stock of Bank of America (BAC). It was doing very well in the final quarter of 2019: the price broke above the 2018-2019 resistance line and has been trending up since then. In November-December the price consolidated in a rectangular pattern, but then it made a breakout to the upside. The news that members of the Federal Reserve didn’t foresee rate cuts in 2020 supported the BAC price as banks thrive in the rising rate environment. The news provided a fundamental reason for a buy trade you see on the picture below.