We get asked all the time which instrument we should be trading in the market. You have so many different options when it comes to trading. Everything always goes back to equities because that is what we know most about. In this article, we will discuss some great opportunities to look at when trading equities. Although you can trade such things as options, FOREX, binary options and many other methods when it comes down to the equity markets.
The great thing about trading the markets is you don’t have to have one particular bias. You can decide to either go along or you can decide to go short. If you expect the equity instrument to rise over a period of time then you will set a buy. If you decide that you think the market or equity will go down then you want to go short. At any given time you can reverse this position and go the opposite direction.
In this section, we’ll talk about the different options you have when selecting stocks. They’re usually broken down into three major components. This includes small, medium, and large cap stocks. If you think about it, the smaller the company then the less money they have. The larger the company the more money they have. However, they can be going through some rough times and their market share could be eaten up by other competitors. Small companies that fall under the small-cap might have growth opportunities that you may not see. This is when you need to decide if you want to go on the long side on a small Equity.
You do have the option of trading ETF’s. These ETF’s allow you to get a piece of the overall market by sector or size. If you decide to trade ETF’s make sure you understand the difference between all the different instruments. They can be much different than they look on paper. Each one will have its own disclosure and will share information with you about how it is traded. Sometimes you will find these ETF’s traded three times the size that they are. This can hurt you significantly if you are on the wrong side of the position.
If you are new to trading and you feel like you need to get your feet wet, why don’t you look at the large-cap companies. These companies have high standards and are followed by many institutions. You can see stocks like Apple, Microsoft, and Coca-Cola. These large corporations will trade on a certain level, but you’ll be able to get in and out of your positions because of the amount of liquidity. Liquidity is a huge aspect when it comes to trading small caps versus large caps. Sometimes there were only be 100,000 shares traded on some of the small-cap companies.
Again, you have to weigh the risk management when it comes to selecting each individual stock you want to trade. If you are looking to take a binary option on this particular trade then you don’t have to worry about holding it for a long period of time. This will allow you to really get a grasp of the market without holding any shares.