Welcome to Sonray's Education Center. Whether you are just beginning to trade or you are a seasoned investor looking for new trading strategies, this Center provides a wealth of information on the most relevant topics.
- The stock market
- How Do I Get Stock Quotes?
- How Do I Place Orders?
- Limit orders
- What Are the Costs?
- What are the risks involved?
- Glossary
The stock market
Company stocks are probably the most well known financial instruments in the world. When you buy a stock, you are purchasing a given number of a company's shares that represent ownership of a corporation. Every incorporated company has stock, but only those that are traded on a public exchange are of interest to investors.
Stock market exchanges are found all over the world, from New York to Copenhagen and Hong Kong. Typically, a German exchange will trade German companies and a Swiss exchange Swiss companies, but larger companies are often traded on more than one exchange. The trading takes place on the exchange itself where prices fluctuate according to the laws of supply and demand.
How Do I Get Stock Quotes?
In the client station, you can view stock quotes, but there is a 15-minute exchange-regulated delay on the quotes. If you need an up to the minute quote, you can get virtually live quotes by viewing a quote for a CFD on the equivalent stock. (See the CFD tutorial for more information about CFD's). For example, if Harley Davidson is quoted at 44.00 on a 15-minute delayed quote, you can just type in the symbol for a Harley Davidson CFD and view streamed quotes that are updated regularly. If the quoted price is bid 43.87 and ask 43.95, for example, you can see that the current price for the stock is around the midpoint between those two prices.
You can also view stock charts for stocks that are members of major national indexes like the FTSE 100 and S&P 500.
As stocks are traded on an exchange, there is a 15-minute exchange-regulated delay on the stock quotes. However, for if you are enabled to trade physical stocks on NYSE/NASDAQ, you will receive real-time quotes on these exchanges.
How Do I Place Orders?
Since the process of buying stock through the Client Station is fully automated, trading is carried out almost immediately for any heavily traded stock. Placing an order to buy a stock is as simple as typing in the symbol in the Client Station trading window, entering the number of shares and then selecting Buy or Sell and then clicking on "Place Order". In a few seconds, the order will have been executed. Because stock trading has to go through an exchange, you will not necessarily get the stock for the most recent price you have seen for the stock, because the market can move for or against you, even in the seconds it takes to fill an order. But if you place a market order, you will get the stock. You can also place limit orders as you can read about below.
Limit orders
Instead of trading the current market price, you can place a limit order. If you use a buy limit order, you are saying that you don't want to buy the stock until its price has fallen to a specific level. Let's say that you are interested in buying Harley Davidson stock, which is currently trading at 44.00. But, you think the price will go somewhat lower and therefore you don't want to buy at the current level, but at 42.00. Instead of having to watch the screen and wait for the market price to descend to 42.00 (if it ever does), you can place a limit order to buy at 42.00 that will automatically execute when the market reaches that price. Note that the trade is only triggered when the market reaches that price, it does not guarantee that your trade will be executed at precisely 42.00. Especially in fast moving markets, the actual price at the time of execution may be slightly or significantly lower than specified in your limit order, depending on the speed of the market's movements.
What Are the Costs?
- The cost of share trading is 0.25% of the traded value.
- Minimum brokerage fee per trade is 25 USD or 25 EUR.
What are the risks involved?
The risk of owning company stock consists of:
- a business risk
- a financial risk
The business risk is the risk related to the prospects for the type of business the company is involved in, and the financial risk depends on its financial structure; i.e. a lot of debt, for example, increases the risks. By creating portfolios consisting of several stocks from different industries it is possible to reduce your overall risk significantly.
In order to trade stocks you need sufficient information about the market, the news, market trends and access to quotes on all stocks. You can find all of these types of information in the Client Station.
To see how you can trade stocks easily and effectively, please proceed to our stock tutorial found under 'Trading', then select 'Stocks' and then Stock Quick Start'.
Glossary
- Ask
- The sell price. Traders also speak of an ask price, the price requested. This usually indicates the lowest price a seller will accept.
- Bid
- The buy price. Traders also speak of a bid price, the price offered. This usually indicates the top price a purchaser will pay.
- Bid/Ask Spread
- The difference between the bid and ask prices. In thinly traded markets or instruments, this spread may be significant.
- CFD
- A CFD or "contract for difference" is a financial instrument (a derivative) that has the same price movement as the underlying stock. It is used to trade stocks on margin. Because you don't own the physical stock, you create some important trading benefits that stocks don't offer you. For more information please go to our CFD tutorial, found under Trading', then select 'CFDs', then 'CFD Intro'
- Exchange-regulated delay
- To receive live quotes from a stock exchange, you must pay a fee to the stock exchange. Service providers and brokers on the internet are only allowed to provide live quotes to their subscribers/clients if they pay additional fees. They are allowed, however, to send delayed quotes free of charge to as many subscribers/clients as they wish. The exchange-regulated delay varies depending on the stock exchange. It is 20 minutes, for example, for the New York Stock Exchange.
- Indexes
- A numerical measure of the way a variable has changed over some base period. A popular way to use an index is to say that in a given year the index is 100, so that differentials in other years can be expressed as percentage rises or falls from the base 100. All stock exchanges have one or more indexes that track the value of a basket of stocks over time so that investors can understand how the market is doing as a whole. For example, the American NASDAQ exchange has the NASDAQ 100 and NASDAQ composite. Some indexes are created and managed by private corporations, such as the widely known Dow Jones Industrial Average and S&P 500.
- Laws of supply and demand
- Theory about pricing in a perfectly competitive market. If there are more sellers than buyers, prices will drop until a consensus price is reached and vice versa. Thus prices are set according to supply and demand.
- Limit order
- An order that might read: 'Buy 10 June BAB at 93.00', meaning a client is willing to pay no more than 93.00 for the June bank bill contracts. The order can be executed at a price below that, but if the price were a mere few points above, the broker would contact the client to check if he or she is allowed a few points leeway and, if so, would execute the trade. A buy order is a buy limit order when the limit price is below the current market price. A sell limit is a limit order when the limit price is above the current market price. If you want to buy at a price above the current market price or sell at a price that is below the current market price, you would create a "stop" order.
- Market order
- An instruction to buy or sell shares and other financial instruments at the current market price, with minimum delay.
- Market price
- The current price of an instrument or asset in the markets.
- Portfolio strategies
- When combining different stocks that have different risks and different payout scenarios, you will averagely lose on some of your stocks and gain on others. The ideal outcome of course is to have larger gains than losses.
- Risk management
- Trying to control outcomes to a known or predictable range of gains or losses. Risk management in investing is ensuring that you understand as many of the possible outcomes as possible and that you have prepared your portfolio for these outcomes. Risk management may be as simple as placing stop loss orders to prevent large losses or as complex as hedging positions with options or diversifying a portfolio to ensure that you are not overexposed to a single industry or instrument type.
- Shares
- A company's shares represent partial ownership of the company. An investor who buys a company's shares can profit in two ways - from income in the form of regular dividends (distribution of the company's profits) that are payed to shareholders on a regular basis, and an increase in the value of the share itself due to growth in the companies sales, earnings and/or improved prospects for the future.
- Stocks
- Interchangeable with equities, shares and bonds.
- Stocks exchange
- A public marketplace for trading equities (shares),. Stock exchanges date back to seventeenth-century Europe, where traders met in coffee houses to transact business. Modern exchanges evolved from those early meeting places. The exchanges are widely referred to as bourses, after the French for 'purse'.
- Stock charts
- Graphs which depict the movements of a particular stock.
- Stock quotes
- The price you are supplied with to buy or sell stocks on an exchange.
