Stocks are one of the most popular financial investments in the world. On average, stocks offer better returns than fixed deposit savings and other types of savings. However, trading stocks also has a higher risk. In addition, you need a broker to assist you trade stocks. Saxo Bank offers one of the best platforms to trade stocks.
Choosing a stock trading platform is very critical and could be your key to success in stock trading. A variety of trading platforms offer different features and services. Therefore, it is important to ensure that your trading platform aligns with your trading goals. Keep reading to learn more about stocks and why you should use Saxo Bank to trade stocks.
Why Should You Trade Stocks?
Stocks are a valuable part of every investor’s portfolio. Stocks allow you to own a part of different big companies and are among the best ways of diversifying an investment portfolio.
Owning stocks in different companies can assist you in building your savings. Advanced investors also use stocks to protect their money from inflation and taxes. In addition, stocks can assist you in maximizing returns from your investments. However, every trader and investor should understand that stock trading also has an element of risk.
Long-term returns from stocks are better than returns from fixed-income deposits and fixed-income investments such as bonds. Stock prices tend to fluctuate over time, though smoothen out over a long period. Active traders seek to profit from the short-term price movements while investors profit from the growth in share value over a long period. Either way, stocks are a good option for building your portfolio.
Inflation and taxes can adversely affect your wealth, and stock investments give investors better tax management over a longer period. Therefore, stocks help in reducing the effects of inflation and taxes on an investor’s wealth.
Most companies pay their shareholders dividends at the end of every financial year. Such dividends provide the shareholders with a regular investment income which plays a crucial part in maximizing their income. Dividends may also have a favorable tax treatment, which ensures that the amount that gets to you is more.
However, stocks are not all benefit; there are risks associated with trading stocks. One of the risks is that you may lose your entire investment if the stock price falls. Many factors affect the stock price, and every investor and trader must do a lot of research before buying stocks. Stock traders who trade in foreign stocks are exposed to currency risks.
The benefits of using a good broker when trading stocks
What makes a broker good?
When investing small amounts of money, they often recommend micro-funds which consist out of a portfolio of stocks with a very low risk. You can lose money but it’s very unlikely, you are investing in many stocks at the same time instead of one company. These micro-funds are usually managed by experts who buy and sell shares very often to make sure that your investment stays profitable over a long period of time.
They encourage you to use limit orders which means that when buying or selling something an order is made for a certain price. This enables people who think that the share will go up/down to specify on what price they want to buy/sell. The more margin (money) you have the more margin orders you can enter/cancel and this way you can be certain that it will only happen on the price that you think is appropriate. With this strategy it’s possible to earn more than the current market price, but it’s also possible to lose money because if another broker wants/has to buy/sell the same share at the specified limit-price your order will not be executed immediately.
You can set stop-losses and sell-orders on demand which means exactly what they say. If you think something will go down in value you can ask for a stop loss order, if you are certain that it goes up in value you can ask them to set a sell order when the price has reached a certain point. This way your capital is monitored closely during trading hours and when entering or leaving stock market investments your capital is at less risk.
They encourage you to use limit orders which means that when buying or selling something an order is made for a certain price.
Stocks offer a variety of options to both investors and active traders. However, every trader and investor should do their own due diligence before buying stocks. A trading platform is also critical in trading stocks. Saxo Bank offers a platform that will suit the needs of every investor.