If you have been thinking about investing in companies such as Tesla, Google, or Apple, it’s worthwhile to take a look at Olymp Trade, as this platform will enable you to access these and many other leading global stocks.
Investors have found that trading with stocks is a very lucrative way for them to build a solid portfolio and build their financial wealth, both in the short and long term. Traders on the Olymp Trade platform can share in the growth of companies like Google, McDonald’s and IBM by tapping into the success of these winners.
If you are however new to trading in general and don’t quite understand markets, trading in any stocks may be overwhelming. In this article, we’ll explain how stock markets work and how Olymp Trade clients can make use of their access to stock markets.
How are Stocks Traded on Olymp Trade?
Although you may already understand how stocks work, this quick refresher should be handy for beginners. Stocks are essentially part ownership in companies. A company may decide to issue stock for many reasons which include cashing in on their success, or generating capital to fund expansion or specific projects.
Some recent examples of companies that issued stock are Uber and Saudi Aramco. For both these companies, this was the first time they offered stock directly to the public. In the industry, this is known as an IPO or Initial Public Offering. Both these IPOs generated massive awareness from the public as both companies are well known, and the amount of interest in an IPO has a big impact on the starting price of the stock. During an IPO, the new stock is immediately traded by parties that are interested.
Individuals or companies holding stock in a company are called shareholders and they share in the company’s profits in direct relation to how much stock they hold.
For example, if company X has sold 10000 shares of their stock and you buy 300 shares, then you hold 3% of the company. If this company pays out $1000 of its profits to shareholders, you would receive $30 of those profits.
One of the many ways in which investors can generate an income is by receiving profits for their share in a company. These payouts of a company’s profits are known as dividends. For dividends to be paid to shareholders, the company must first make profits and then decide which portion of the profits they will pay to shareholders. Dividends can be paid quarterly or yearly at the discretion of the company.
The number of shares released by a company often runs to the billions. This means that the dividend paid for each share can be very small and investors only receive big payouts if they own a substantial number of shares in the company.
Shareholders can sell, transfer, or trade the company stock they own. This is done via stock exchanges that were specifically created to enable the exchange of shares between sellers and buyers. While doing so, stock exchanges report on the current price of transactions, thereby giving an indication of what the current value of the shares is.
The price of shares in a specific company is therefore largely dependent on demand and supply. If a big number of people want to buy shares in a company because they believe it will do well, i.e. the demand is high, the stock price will go up.
The stocks in some companies are sought after even though the company is not making a profit. One prime current example is Tesla. Investors believe that Tesla will eventually become very profitable and are buying its stock early at a cheaper price.
The opposite is also true. If many people want to get rid of their stock in a company, or the company has issued too much stock, the supply is high and the stock’s price will fall. Companies that run into problems and start losing money can quickly have their stock price drop.
Using Olymp Trade to Trade Stocks Profitably
Many investors that trade stocks don’t really want to own a part of the company or even receive dividends. They are instead looking for opportunities to trade the stock depending on how they predict the stock’s price will move in the future.
On Olymp Trade there are 2 ways in which users can profit from trading stock. On the Fixed Time Trading part of the platform, there are 13 different blue-chip (high price and quality) stocks available to trade, while the Forex side has 5 stocks. Stocks include companies like BMW, Facebook, Starbucks and Microsoft.
When using Fixed Time Trading on Olymp Trade, users only need to predict if a specific stock will go down or up in value within a certain period and then open a trade for any value with the minimum being $1. If the prediction for the price movement is right, they can make as much as 92% profit on their investment.
Example: You have read that Facebook will be releasing their quarterly financial results and many people expect the news to be good. You therefore use Olymp Trade to create an Up position before the release and specify a 1 hour timeframe. Facebook announces the results and the stock price increases within the next hour. You will then be paid for the correct prediction.
Using the Forex side to trade stocks is slightly different, but can also be profitable for Short (Sell) and Long (Buy) positions. The differences are that investors are able to close their positions at any time as there are no time limits and the profitability is based on how big the price change is.
Example: Boeing’s business is hit badly by the lockdowns due to the coronavirus and their revenue drops sharply. Although Boeing’s stock drops, you feel the company will survive and will still make a profit and that the stock price will go back to the levels it held previously. You open a Buy order when the price is low and hold onto that position for a number of hours (or days) as the stock recovers. You eventually close the position to make a profit.
Traders benefit from buying and selling stocks by using economic data and news in both examples. As these companies are frequently mentioned in the news, this creates many good prospects for investors to trade profitably.
A solid way to build up your trading account is by utilizing your trading strategies at Olymp Trade and using them for selected stocks.