| What is Stocks Trading? | | | | amount of leverage available for stock trading is |
| Companies throughout the world issue new stock | | | | usually 4:1. Meaning a $25,000 could trade up to |
| shares every day. They do so to raise capital in order | | | | $100,000 of stock. This is pretty low compared to |
| to invest in the business. Once stock shares have | | | | forex trading or futures trading. |
| been issued the public is free to buy and sell those | | | | Pattern Day Trader Rules. Requires at least $25,000 |
| issues through a stock broker. As the supply and | | | | to be held in a trading account if the trader |
| demand for the shares changes so too does the | | | | completes more than 4 trades in a 5 day period. No |
| price. Changing stock prices means opportunities to | | | | such rule applies to forex trading or futures trading. |
| profit for a trader. | | | | Uptick Rule on Short Selling. A trader must wait until |
| With the arrival of the internet it is now possible to | | | | a stock price ticks up before they can short sell it. |
| buy and sell stocks relatively cheaply and almost | | | | Again there are no such rules in forex trading or |
| instantly. This, coupled with increased volatility has | | | | futures trading where going short is as easy as going |
| given rise to more and more people trading stocks | | | | long. |
| rather than just buying and holding them for years. | | | | Need to Borrow Stock to Short. Stocks are physical |
| Advantages of Stocks Trading | | | | commodities and if a trader wishes to go short then |
| Better returns. Actively trading stocks can produce | | | | the broker must have arrangements in place to |
| better overall returns than simply buying and holding. | | | | 'borrow' that stock from a shareholder until the |
| Huge Choice. There are thousands of stocks listed on | | | | trader closes their position. This limits the |
| markets in the US (such as the New York Stock | | | | opportunities available for short selling. Contrast this |
| Exchange and Nasdaq) and around the world. There | | | | to futures trading where selling is as easy as buying. |
| is always a stock whose price is moving - it's just a | | | | Costs. Although online trading costs for stock trading |
| matter of finding them. | | | | are low they still add considerably to the costs of |
| Familiarity. The most traded stocks are in the largest | | | | daytrading. Online futures trading is about 1/4 of the |
| companies that most of us have heard of and | | | | cost for the equivalent value. In the UK 0.5% stamp |
| understand - Microsoft, IBM, Cisco etc. | | | | duty is also levied on all share purchases making |
| Disadvantages of Stocks Trading | | | | trading virtually impossible - Hence the popularity of |
| Leverage. With a margined account the maximum | | | | spreadbetting. |