Broker to Trading

There are different ways to trade Stocks online. It is possible to buy and sell real Stocks and it is possible to trade Stocks CFDs. When trading a Stock CFD, the trader does not own the Stock. A CFD is a Contract for Difference and references an underlying market (i.e. a Stock). This allows the trader to trade it without owning it. This means that the trader can go long, or short and can use leverage. However increasing leverage increases risk.

Some brokers offer the capacity to buy to own and sell real Stocks (without leverage) and also to trade Stocks CFDs (with leverage). These brokers are included in the comparison table above, which offers a selection of brokers with a range of trading platforms for trading Stock CFDs. When trading Stocks CFDs, the trader can trade on the online trading platforms used for other CFD markets. This means that platforms associated with markets such as Forex, may also be available, for example MetaTrader 4 (MT4).

The trading platforms will have a range of tools allowing the trader to analyse any market, including tools for technical analysis (such as technical indicators and graphical objects) and fundamental analysis. When day trading a Stock CFD, technical factors may be more important than some fundamental factors. Like with any market, the trader still has to watch out for news events affecting it, for example economic news or news about a Stock in particular (such as earnings release).

It should be noted that technical analysis when day trading should not be seen as a predictive tool, but it can give pointers to what is happening to the market, which would other wise be opaque to the trader, such as flows in and out of markets, helping to create patterns on the chart.

The number of Stocks on a platform can be related to the type of platform. For example, if a broker offers MT4 Stocks CFD trading, then the number of Stocks is typically smaller than on some other platforms. MT4 has a successor platform, called MetaTrader 5 (MT5). MT5 provides a number of enhancements, including more technical indicators built into the platform (but the MT4 platform may typically actually have more), graphical objects and time frames as well as a different language for programming its online trading robots. MT5 may offer offer more Stocks CFDs depending on the broker. However in general, if the trader wants to trade from a large number Stocks CFDs (or real Stocks if offered), they can find these on custom platform (for example a web trader or a downloaded platform) offered by a broker.

Some online trading platforms offer tools like Social and Copy Trading and Crowd Trading to assist the trader, apart from charting tools and a news feed. These approaches share this similarity, that they add data about other traders to the data the trader can find from other sources (such as charting analysis). However they differ in a number of key ways.

Crowd trading takes the aggregate behaviour of traders and lets this provide extra data about market news, for example what the crowd of other trader are doing about a given Stock. This can add information about the reactions of other traders to news about a Stock, for example. Social Trading adds the actions and commentary of individual traders to a feed. Thus the trader can find out what other traders think about markets and are doing when trading them, to the extent this information is shared. Copy trading is a kind of trading automation (and indeed is sometimes called auto trading). Copy trading lets the trader find another trader and based on information such as their past performance, lets the trader copy their trades into the trader's own account. However because a trader performed well in the past, does not mean they will continue doing so.

Crowd, Social and Copy trading, especially if presented on a user friendly platform, can be helpful for the beginner trader, yet all traders need to be aware of the limitations of following other traders versus doing their own analysis. However these platforms will also have tools to enable the trader to analyse Stocks as well.

This article has mentioned online trading robots, and this is another feature of Forex trading platforms which may interest the advanced Stocks CFD trader. MetaTrader 4 and MetaTrader 5 offer robots called Expert Advisors (EAs). JForex provides robots based on the Java programming language. These are programmed in accordance with a set of instructions or algorithm. The trader can use ones already made or can build them themselves. Robots will execute trades on behalf of the trader in accordance with the algorithm. For example they may automate the process of a trader following an indicator signals and making a trade based on it. However automated trading can result in drawdown or losses in the trader's account as the robot executes trades against the market, where a human trader might exit or change the trade. Then again part of the advantage of the robot is that it ploughs through situations where a human may find difficult (i.e. it might work out in the end). Because a robot or any strategy worked in the past, does not mean it will work when applied to the market. Robots and human strategies can be backtested, but again they may not work on the live market.

So trading Stocks CFDs can open up new platforms and tools for the trader from beginner to more advanced, but the trader also may wish to stick with a user friendly trading platform designed for the human trader and make their analysis using platform and other tools.