Are you looking for a guide on how to trade stocks on Olymp Trade? You’ve come to the right place! In this blog post, we will walk you through the step-by-step process of trading stocks on the Olymp Trade platform. We’ll cover everything from creating an account to making your first trade. So whether you’re a beginner or a seasoned trader, this guide has something for you!
Before we get started though, let’s earn something about this thing called stocks.
What are stocks?
Stocks are shares of ownership in a company. When you buy stocks, you become a partial owner of that company. And as the company does well, so does your investment!
Stocks are traded on stock exchanges all over the world. The two largest exchanges are the New York Stock Exchange (NYSE) and the Nasdaq. But don’t worry, you don’t have to be in New York or have a lot of money to trade stocks. With Olymp Trade, you can trade stocks from the comfort of your own home!
If you download the Olymp Trade app, you will be able to buy and sell stocks, making a profit on the price difference. And it’s not even that difficult to start, you can start with the simplest strategy known to man, buy and hold.
How is this strategy good you ask?
The point is if you buy a stock right now and hold for say one year, and during that one year the revenue of the company whose stock you are holding grows, your shares will grow in tandem. And you will end up getting value for your money.
Let’s look at the simple example below.
Over the past 12 years, the price of Google has grown by over 400%. Do you know what that means?
It means if in 2009 you bought $1,000 worth of Google shares and held them to 2021, you’d be worth, well over $4,000. That’s the power of buying and holding.
If you continue following this series, you will continue to learn more strategies that can help you get massive returns with stocks.
For now, let’s continue learning about the basics of stocks trading.
Why do you need stocks?
Stocks are often seen as a safe investment. When you buy stocks, you’re buying a share in a company that will likely exist for many years to come.
Compare this to other investments, like real estate or cryptocurrencies, which can be very volatile and may not be around tomorrow.
This is not to say that stocks don’t have risks. Stocks can go down in value, and you may lose money if you sell them. But over the long term, stocks have historically gone up in value, which is why they are often seen as a safe investment.
Another reason to invest in stocks is that they offer the potential for high returns. While there are no guarantees, if you choose the right stocks, you could see your investment grow significantly over time.
Stocks Categories: What are blue chips, growth, cyclical, and defensive stocks?
Now that we know a little bit more about stocks, let’s take a look at the different types of stocks.
The first type of stock is blue-chip stocks. These are large, well-established companies with a history of making money.
They tend to be less volatile than other types of stocks and offer a higher dividend, which is a payment made to shareholders from the company’s profits.
Another type of stock is growth stock. These are companies that are growing quickly and have a lot of potential for future growth.
They can be more volatile than blue-chip stocks, but they offer the potential for higher returns over time.
The next type of stock is cyclical stocks. These are companies whose stock prices go up and down with the economy.
For example, cyclical stocks might do well during an economic boom but poorly during a recession.
Finally, there are defensive stocks. These are companies that tend to do well even during tough economic times.
Utilities and healthcare companies are examples of defensive stocks.
Now that you know the different types of stocks, let’s take a look at how to trade stocks on Olymp Trade.
When you’re ready to start trading stocks on Olymp Trade, the first thing you need to do is open an account.
Did you succeed in opening an account? Don’t trade. Not yet. At least not until you finish reading this post.
Why? Because trading stocks is just as risky as trading other financial instruments and I believe it’s morally right to mention the risks before I show you how you can begin trading stocks online.
Risks Associated with Stock Trading.
When trading stocks, it is important to note that there are risks associated with getting involved in the stock market.
Some of these risks include the following:
- The company you invest in may go bankrupt, resulting in a loss of your investment.
- Stocks can go down in value, meaning you could lose money if you sell them at a lower price than you paid for them.
- You could experience losses if you don’t diversify your portfolio, meaning you put all your eggs in one basket by investing only in one company.
- The stock market can be volatile, which means prices can go up and down quickly and without warning. This can result in losses if you’re not careful.
Now that you know the risks associated with trading stocks, let’s look at some of the factors that drive prices in stock trading.
What causes stock prices to change?
There are a number of factors that can cause stock prices to change, including the following:
Earnings announcements, dividends, earnings per share (EPS), price-to-earnings (P/E) ratio, company news, analyst ratings and recommendations, global economic indicators… you name it.
Each of these factors can have an impact on stock prices and it’s important to keep an eye on them if you’re planning on trading stocks.
Would you like me to discuss some of these factors? I’ll assume you nodded “yes”.
Let’s start by looking at supply and demand as an important factor that drives the price of stocks.
a). Supply and demand.
The law of supply and demand is a basic economic principle that drives the price of many things, including stocks.
In general, when there is more demand for a stock than there is supply (when more people are buying), the price of the stock will go up.
Conversely, when there is more supply than there is demand (when more people are selling), the price of the stock will go down.
Did that get home?
So now let’s try to imagine that it is 2009 again. Google is going public and so many investors including me and you are optimistic that Google is going to become a successful company in the future.
What do we do? We all end up buying Google shares.
This automatically increases the price of Google’s shares as our decision to buy increases demand for the limited stocks.
Did the price of Google shares just increase? Were you holding some of the shares when this increase was triggered? You can now sell to cash in the profits from this increase.
Let’s assume that you also bought shares for company “X” in 2020. And due to Covid 19 impacts, it publishes its debts today and it’s clear that its debts are outrageous.
This is a factor that can affect company “X” in the future.
So since traders are pessimistic about the future of this company, including yourself, you all rush to sell the shares of the company because the risks of investing in the business now greatly exceed the potential for profit.
Do you know what this action will do to the stocks of company “X”, we will have more supply of company “X” shares thereby reducing the price of its shares.
And what happens if supply and demand are almost matching?
In this case, you will not see so many fluctuations in the price of stocks as what you see when demand significantly exceeds supply or vice versa.
b). General observation of the market.
Hard as it is to believe for beginners, the general price direction of most of the stocks can greatly affect the price of a single stock even if the other factors are overlooked.
This happens because the shares of this company are included in the investors’ portfolio in a certain proportion and when most of the shares in the portfolio begin to fall, investors are forced to sell the “good” shares as well in order to maintain the desired proportion of securities in the portfolio.
Additionally, the price growth or decline of this individual stock may be influenced by psychological factors.
Are the majority of traders optimistic about the market? You would be surprised that the price of this stock in question ends up growing just because traders are in a good mood.
The opposite of this statement is also true.
c). Unforeseen circumstances.
Have I already mentioned that unexpected layoffs and promotions in a company, natural disasters that can affect a business, malfunctions, interruptions, and outages may also have a direct impact on the price of shares?
Any unforeseen situation that may affect the operations of a company should be taken into consideration when trading stocks.
This is because traders will more often than not rush to get rid of whatever shares they are holding to try to minimize the risks that may follow.
Also, keep in mind that a bad situation for one company can be a good situation for another. In hindsight, you can also make good money by trading shares of these companies that end up benefiting from the misfortunes of others.
To this point, it’s needless to say that different factors have different impacts on the growth or decline of different companies.
It’s up to you to do your research and come up with the best portfolio which guarantees steady returns.
And if you are a beginner, you can use my guide below to find the best stock to trade season in season out.
What stock should you choose?
Before you go on buying stocks in Olymp Trade or anywhere else, there are a few requirements that you must define as part of your portfolio strategy.
1). You can define all that for yourself. But the rule of thumb is, you should consider the size of the company and the strength of the business whose stocks you want to trade.
Is the business you are eying Big? Go for it. The bigger the better.
Reasons why shares for small companies aren’t always ideal for investors.
a). It is difficult to predict the business prospects of such companies
These businesses may be doing well today but what about tomorrow?
Will they be able to compete? How visible are they?
Simply put, they may not have as many products or services as compared to their larger counterparts which makes them more susceptible to economic downturns and other unfavorable business conditions. And if you buy on them, you may become collateral to these downturns.
That’s however not to say those small companies can not always make you rich as a stock investor. Consider other factors before you shy away from them.
b). The stocks of these companies are mostly not traded on the stock exchange.
So, if you want to buy or sell them, you will have to find a willing party to do business with which can be quite tasking and time-consuming.
c). They may not have the financial muscle to pay good dividends.
If you are buying stocks for the purpose of earning dividends, you may want to consider companies that have a good track record of paying out dividends.
d). Stocks of these companies are mostly illiquid.
This means they can not be converted to cash as fast as those of bigger companies. So, if you need quick cash, these stocks may not be ideal for you.
e). The stock prices of small companies may be more volatile as compared to those of larger companies.
This is due to the fact that there are fewer buyers and sellers in the market which makes it easier for a few big players to manipulate prices.
Lest I forget, some of these reasons are only disadvantageous to you if you will be buying the shares of companies that are not listed on major exchanges.
But we are still talking about companies that are listed in major exchanges and can be trading via the Olymp Trade app right?
If those are the stocks we are talking about then it should give you the consolation that even if company shares fall, it’s likely that the price will rise once again when investors’ appetite increases.
And with the Olymp Trade app, you can cash out your shares at any time.
2). Consider the market sector of the stock you want to trade.
The sector of a company defines the business that the company is involved in.
There are different sectors in the stock market and each has its own unique dynamics.
So, you must understand these dynamics before you buy into any sector.
To give you an idea of what I mean, below are some examples of companies from different sectors and a brief explanation of the sector they are in.
- Apple Inc. is a technology company that designs, manufactures, and markets consumer electronics, computer software, and online services.
- Nike Inc. is a multinational corporation that is engaged in the design, development, manufacturing, and marketing of footwear, apparel, equipment, and accessories.
- Johnson and Johnson is a multinational healthcare company that manufactures and sells products in both the pharmaceutical and consumer packaged goods industries.
These are just a few examples. You should do more research on different sectors before you invest in any of them.
When you know what sector a company falls into, it becomes easier to predict how the stock will perform.
This is because you know the dynamics of that sector and you can compare the company’s performance to that of other companies in the same sector.
As a rule of thumb, you should include stocks of different companies that operate in different sectors in your portfolio.
This will help cushion you against losing money if there are problems affecting all businesses across one sector.
For example, it is highly unlikely that problems affecting the manufacturing of cars will have a direct impact on payment platforms.
This means that if your portfolio has both Tesla and VISA if you’re eaten alive on Tesla, you will survive on Visa and the other sectors unrelated to car manufacturing.
This principle is called diversification. Not putting all your eggs in one bascket.
3). Revenue Growth.
Again, if you want to be safe while trading stocks, choose companies whose businesses are growing.
You can find out if a company’s business is growing by looking at its revenue growth.
Revenue growth is the year-over-year increase in sales that a company experiences.
Ideally, you want to invest in companies whose businesses are growing at a rapid pace.
However, such stocks are usually more expensive and may not be within everyone’s budget.
A good compromise would be to invest in companies whose businesses are growing at a moderate pace.
To find out the revenue growth of a company, you can look at its financial statements.
If you don’t have the time or patience to do that, you can always find this information on financial websites such as Yahoo Finance or Bloomberg.
You should also look at the debt-to-equity ratio of the company you want to trade.
This will give you an idea of how risky it is to invest in that company.
The higher the debt-to-equity ratio, the riskier it is to invest in the company.
Remember, you are not trying to get rich quickly when you trade stocks.
You are trying to make money by investing in companies whose businesses are growing steadily over a long period of time.
Does that make sense? It should.
Stocks trading for beginners: How to Buy Your First Stock.
Now that we have learned the basics of stock trading and grasped some basic ideas of everything in stock trading.
Let’s look at the Olymp Trade trading platform for stocks and try to place our first “Buy” order on blue-chip stocks, cyclical or growth stocks listed on the platform.
Step 1. Create an account in Olymp Trade.
Olymp Trade is an online trading platform that allows you to trade stocks with your phone, laptop, or tablet.
When you download the Olymp Trade app or create an account via the browser, your account is credited with $10,000 which you can use for trading practice in your demo account.
If you are new to stock trading and you just want to get a glimpse of the trading platform and to learn how stock trading works by practicing, go ahead and have a look at the Demo account.
When you are ready to start trading, shift to the real account to begin making real money.
Step 2. Choose the best stock to trade?
Have you read this post to this point? Then chances are, you already know what to look for when buying stocks.
All factors considered, click the asset button as shown in the image below and navigate to the stock you wish to BUY.
Remember, you can only buy an actual stock in Olymp Trade with a real account. Fund your Olymp trade account to begin buying your preferred stocks.
Step 3. Set the required parameters.
In this step, you can adjust the number of stocks, check the units available to buy, and check the amount you will be charged to buy any specific stock.
Is your account balance enough to BUY? Go ahead and buy.
Ideally, 0.01 shares of 3M company go for $1.5. Give or take. Can you afford that? Click the BUY button to engage.
Step 4. Open portfolio to monitor your stock.
You can buy more of the stock with this window on the left or sell if your objective is met. if you click on Buy, a new window will open for you to choose the quantity and to engage.
Same to sell. A new window will open on the right for you to adjust the quantity you want to sell.
Happy trading and I hope you make money trading stocks in Olymp Trade.