US Markets Are Soaring, But Will The Rally Last?

If you’ve been keeping up with the stock market for a month or so, you’ll like that the markets have been incredibly volatile. Some days, investors cannot catch a break. Other days, things look like they’re finally going to turn around for the better. The market just fell into the latter category once more, but many investors are still eerie about investing their money in the market. Should investors place their money in the markets at this point in time? Several big happenings will completely change the landscape of the stock markets in the coming months.

Pharmaceutical

A major blow has been struck to Pfizer and Allergan. The two companies once had their eyes set on merging and becoming one of the largest pharmaceutical companies in the entire world. Unfortunately for both, the $160 billion deal has been called off. Although this might not look like a terrible thing from afar, both companies have already been punished for the misstep. In fact, the cancellation of the project has reportedly costs banks nearly $200 in fees! According to Pfizer, the company’s decision was based on the Department of Treasury’s recent Adverse Tax Law Change alteration.

Neither company wanted to pay additional US taxes, so the deal was put to a halt. On the flip side, China may finally be turning around for the better. According to the biggest Chinese exporters, it is believed that the country has hit rock bottom. This may not be a good sign right away, but it gives hope that things can only go up from here on out. Although the group is only a tiny collective of China’s market, they sincerely believe that conditions could improve this year and that would directly lead to the betterment of the US stock market.

Oil

Oil has always been a leading factor and it continues to be so. Much of the success of yesterday’s market is owed directly to the rise in oil prices. Will this trend continue in the coming weeks? This is doubtful, since there is concern regarding output restraint on behalf of oil producers. OPEC, the Organization of the Petroleum Exporting Countries, has played a game of back and forth regarding restricting their crude oil output. The group is scheduled to meet and discuss the move on April the 17th. Until that date arrives, oil will likely remain as volatile as ever.

Air Travel

Virgin American (VA) stock is on the rise and many investors are probably wondering why. Well, it appears that Alaska Air Group has plans to purchase Virgin America. The price tag will be $2.6 billion and plans are already set to expand flights on U.S. West Coast. Each Virgin America share will cost Alaska Air $57, which is nearly 86% higher than it was last month (March).

This deal will definitely create a dominating airline with an American West Coast expansion. Virgin America was launched in late 2007 and it was well known for budget ticket opportunities. Sir Richard Branson, minority owner has admitted that he is sad to hear the news about the sale, but he knew that he could not own more than 25% of the company, because he is a British citizen.

Forex

All in all, the market could go either way. The good news is that China and OPEC are offering a glimmer of hope. Until they both make the necessary adjustments, it may be best to stick with Forex Trading and attempt to profit from trading currencies. Keep a sharp eye on World Currency.

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Stock Trading vs CFD Trading: The Pros and Cons of Having Options

Traders and Investors

Traders and investors have a wide range of options available to them when dabbling in the financial markets today. Conventional investments at bricks and mortar institutions typically require the purchase of underlying financial instruments such as stocks, bonds, indices, commodities, mutual funds, and ETFs. These traditional investment paradigms are understood by traders around the world. Multiple licensed and regulated institutional brokers currently exist, offering access to the global financial markets i.e. bourses.

A wide range of investment options is currently available in this format, such as technology stocks, industrial stocks, blue-chip stocks, and the like. Popular bourses include the Dow Jones Industrial Average (DJIA), NYSE (New York Stock Exchange), NASDAQ, S&P 500, FTSE 100, FTSE 250, Nikkei 225, CAC 40, DAX 30, ASX and multiple other indices. These bourses are the de facto exchanges where public companies are listed. When day traders, swing traders, or casual traders are looking to invest their hard-earned funds in markets, they can always go the conventional route by investing in actual stocks.

Your profit potential in stocks is dependent upon asset price appreciation. This means that you will purchase the underlying asset (take ownership of that asset), and wait for it to appreciate over time. This is a slow growth strategy, and a medium to high-risk investment option, depending on market volatility and related concerns. Investors with an eye to owning stocks are typically in it for the long haul. Traders can also benefit from buying physical stocks and then selling them through day trading or swing trading actions. A day trade is opened and closed within the same business day, while swing trading references a trader’s ability to swing into the markets once he/she spots a trend. Swing trades can last as long as 2 weeks.

Stock trading is especially popular now that US markets have been injected with newfound momentum. For example, a trifecta of factors is fuelling explosive growth in the NASDAQ, S&P 500, and Dow Jones. These factors include tax reform going into effect on December 31, 2018, deregulation of the financial sector, and increased monetary tightening with higher interest rates. This is like the perfect storm for explosive stock price appreciation and traders at leading platform such as eToro can now access physical stocks and take advantage of market realities. Investment opportunities are available to traders and investors across multiple markets.

How Do Traditional Stocks Compare to CFD Stocks Trading?

The traditional investments – owning physical stocks – is still preferred by many people, but there are alternatives in the form of CFD trading. A CFD is a contract for difference. It is a derivatives trading instrument where a trader/investor does not buy the actual stock. Rather, the trader/investor buys the option to sell a contract that tracks the price movement of the underlying financial instrument. It is a fundamental difference, and there are many inherent benefits of CFD trading.  However, the benefits of CFD trading should certainly be weighed up against the merits of owning actual stocks which are an actual asset, not a derivatives product.

Here are some factors to consider when trading CFDs

  • CFD trading and tax is an important consideration. In the US, CFDs are considered swap contracts with ordinary capital gains/capital losses being used for the tax realization. In the UK, losses can be offset against profits for tax purposes. Further, there is no stamp duty, and CFDs offer 24-hour dealing.
  • CFD trading includes leverage and margin, meaning that you don’t need to have the full value of the trade amount in your account. A 50% margin only requires 50% of the trade in your account. A 2% margin only requires 2% of the trade value. In other words, the cash requirements for CFD trading are significantly less than they with stock trading.
  • It is important to remember that CFD trading and the leverage/margin elements can result in significant profits, or significant losses, depending on which way trades go.
  • CFDs are considered a hedge against traditional stock trading and investments. In other words, if stock markets are crashing, you can hedge with put options on CFDs to protect your investments.
  • CFD trading is permissible on a wide range of underlying assets such as stocks, bonds, commodities, indices, currency pairs etc.
  • CFD trading can be executed with a professional brokerage with no fees involved. Plus, there are no restrictions vis-à-vis day trading requirements.

Traders and investors have a wide range of financial instruments to choose from vis-à-vis CFDs and traditional stocks trading. CFDs are considered an outlier investment option, and are traditionally used as a hedge against downturns in stocks. Ownership of actual stocks remains the most heavily invested market when it comes to equities. Stocks trading has historically generated significant profits over time, while CFD traders are typically on the losing end of the spectrum. The FCA estimates that some 82% of traders lose money on CFD trading, owing to their lack of understanding of the financial markets, and high leverage. Picking blue-chip stocks is a safer option, albeit with an element of risk. Both of these investment options should be considered, and the merits and pitfalls weighed up against one another.

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How Beginners Prepare for Stock Market Trading

 

Trading on the financial market can be a fascinating activity and a great way of making some money. For those with the time, commitment and knowledge, it can even become a primary method of income, netting sizeable rewards. And even if you can only commit a limited amount of time to the market, you can still provide yourself with a nest egg for your retirement.

But while the opportunities are almost limitless, the risks are also very real. Starting to trade and invest in stocks without any knowledge or preparation is a sure way to lose everything. Nevertheless, there are straightforward ways of preparing yourself to take on the market that will give you a good chance of coming out a winner.

Study the market

You can start simply by following the market. Yahoo and Google both offer finance coverage – these are great places for beginners to study how the market works. As you grow more confident with the terminology, you can move on to the Financial Times or the Wall Street Journal. That way you’ll learn to spot trends, read analyses and pick up on economic concepts and jargon. There are many sources, both online and off, for useful articles.

Follow the greats

When you have the time, you should also consider reading a few of the many books on the subject of investment and stock trading. As a general rule, avoid the more sensational volumes that promise to make you a millionaire overnight. Look out for the major names in the field, such as Warren Buffett or Benjamin Graham. Many of the strategies applied sixty years ago are still valid today.

Take a course

If you’re really serious about getting involved with investing and trading on the financial market, then it’s a good idea to enrol on a professional course to learn the basics. The foreign exchange market, or forex market, is the world’s largest financial market and is open 24 hours a day, with international currencies constantly traded against each other. Forex trading courses are available that will show you how to make money on this market, whether it’s going up or down. Financial opportunities are always available if you know how to seize them. The risks are minimal if you know how to protect yourself, and trading for just an hour a day can be enough to earn you a sizeable tax-free secondary income.

Open an account

The next step is to open an account with a reputable online broker. You might want to find one that offers virtual trading as well, so that you can practise without taking any risks, until you get the hang of it. Use online forums to ask questions and pick up advice, and better still, get yourself a mentor who has experience of stock market trading. This is a tried and tested way of progressing for all successful investors.

Most importantly, establish your financial goals and how much you can afford to invest before you start. Generally, it’s best to start small and stick to one simple strategy. Treat any winnings as a bonus while you’re learning the ropes, and have fun!