Forex Stock Trading

Along with currencies and precious metals, securities are traded on world markets. At the state level, it is usually about bonds, while at the level of private investors, trading in shares of large international companies is in demand.

Traders trade securities on Forex using CFDs - Contracts for Difference. Operations with CFDs are speculative and their purpose is to profit from the difference between the purchase price and the sale price of a share without directly transferring ownership of the securities. The share in such transactions is the underlying asset of the CFD, also referred to as the “basis of the contract”.

How to trade

To understand  how to trade stocks on Forex  and profit from price fluctuations, you need to carefully monitor the news that affects the price of the selected company's stock. A lot of such information is published for large companies, and it can be divided into several categories:

-  changes in the composition of the management , press releases, announcements of new orders, announcement of plans for the future, etc. All these factors can affect the value of stocks both in the short term and in the medium term, setting an upward or downward trend.

Example: the  head of the American automobile company Tesla Motors (TSLA) announced his intention to present a new model - Model D. At the same time, such a development was not previously reported, and this model did not appear in the company's plans known up to this point. The unexpected announcement of a completely new and almost ready-to-sell commercial product from the company revived stock trading on Forex and increased the value of TSLA by 5% in two days.

-  quarterly financial reports of the company : data on profit, revenue, forecasts and other financial indicators. Each publication of such information affects the value of the shares, since it directly reflects the future profitability from owning them, moreover, announced not by third-party experts, but directly by the company itself.

Example:  On November 26, 2014, the quarterly report of the American engineering company Deere & Company (DE) lowered the company's stock price, as it showed a decrease in the company's profit for the year against analysts' forecasts. The market's reaction was a sharp drop in the company's stock prices, which subsequently rolled back due to, in general, the company's stability and data on an increase in the planned amount of dividends per share.

changes in the company's credit ratings assigned by the largest international rating agencies - S&P, Moody's, Fitch.

Example:  S&P has assigned Twitter (TWTR) a BB- ​​credit rating, which is considered "junk", although the outlook for the company's rating was previously stable. S&P analysts noted that at the end of the third quarter of 2014, about half of Twitter's cash and cash equivalents were proceeds from the placement of bonds, and announced their readiness to revise the rating in case the company reaches profitable level by 2016. At the same time, the agency doubts the possibility of such an outcome. The agency's decision had a negative impact on the dynamics of TWTR shares, which by the end of the session on November 13 fell by almost 6%.

  changes in the ratings of the company's shares , which are assigned by large investment banks and brokerage companies. Investment structures often give their forecasts for sectors and individual stocks, while setting, as a rule, their target values. The assessments of companies such as Goldman Sachs, JP Morgan and others are highly respected.

Example:  Goldman Sachs analysts upgraded Exxon Mobil Corporation (XOM), the world's largest private oil company and one of the world's largest corporations by market capitalization, to Buy from Neutral. In response to this decision, XOM shares rose more than 3%.

-  reports of mergers / acquisitions (M&A)  also affect the value of shares in the market. Consolidation of promising companies tends to increase the value of the stock.

Example:  In May 2014, Apple Inc. (AAPL) has confirmed the purchase of headphone and audio manufacturer Beats Electronics. The purchase of Beats will allow Apple to strengthen its position in the market of audio accessories and music Internet services, which was immediately reflected in the AAPL quotes - the company's shares rose in value.

 reports of accusations, investigations and fines  against large companies, which may affect their development strategy, slowing down or canceling previously announced programs.

Example: The  US National Highway Traffic Safety Administration has received over 260 complaints over the past 11 years about ignition problems in the cars of the largest American automobile corporation - General Motors Company (GM). GM said that a defect that can turn off the engine and power unit of a car while driving is associated with 13 deaths. Later, information appeared in the media that this defect caused the death of 303 people. In response, the company recalled a large number of vehicles and suffered significant financial and reputational losses. In light of this scandal, GM shares fell significantly.

The principle of trading in securities of large companies does not differ from the general principle of speculative trading in currencies - as in the case of currencies, it is necessary to track economic and political news, and you can successfully trade shares only if a Forex trader carefully searches and analyzes information on the selected instrument and makes decisions on a deal based on reliable data from official sources.

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