What is short selling a stock?

Short selling, or shorting, is a strategy used by traders in an attempt to profit from falls in the price of a stock. While you can short other assets types, such as FX, commodities, or indices, stocks are the most commonly shorted instrument.

How short selling works

Traditionally, a trader interested in shorting a stock in a company needs to borrow them from someone who already holds them, like a broker. They then sell these shares at the going market price.

If their prediction is correct, and the shares in question do appreciate in value, they are able to repurchase the same quantity of shares that they borrowed for a lower price than they received when they first sold them. They can return the shares to the broker and keep the difference between the original sale price and the repurchase price – minus fees – as profit.

For example, imagine a trader interested in short selling Goldman Sachs borrowed 100 shares on June 5th, 2020, and sold them for $22,200 ($222.00 per share). They then waited until June 26th and bought 100 shares in Goldman Sachs for $19,000 ($190.00 per share). Without fees, they would have made a profit of $3,200.

A candlestick price chart illustrating short selling Goldman Sachs

Thanks to contracts for difference (CFDs), you don’t actually need to borrow or sell a stock in order to short it. You can simply short the CFDs, which are derivatives that track the price of the underlying stock, instead.

Why trade stocks short?

Shorting a stock gives you even more flexibility in how you trade the markets. There are many opportunities that you can take advantage of, as not every business has promising fundamentals or operates in a strong sector.

Wirecard is a perfect example. Although it was considered one of Germany’s leading tech companies, many, including journalists at the Financial Times, raised alarm bells. Wirecard was accused of misreporting its financials, giving the market a false impression of its business.

In June 2020 short sellers were vindicated, when, after having delayed reporting its results as many times as the regulators would permit, Wirecard was forced to admit that nearly €2 billion in cash that was missing from its balance sheet probably did not exist.

The share price collapsed. In the two days following the company’s bid for insolvency, the share price fell almost 100%, and short sellers made a total of $1.2 billion in the week ending June 26th.

Short selling isn’t always a sign traders believe that a business is poorly run or hiding potentially criminal activities. Sometimes they just believe that the market has made an error in how it is valuing the company, and that eventually the price will correct lower to reflect its fair valuation. Or they could be expecting that a wider market downturn will impact the stock in question more than others.

What is a short squeeze?

Short positions lose money when the asset in question rises in price. If something happens to drive an stock significantly higher, short traders may be forced to close their positions to prevent further losses. In order to close a short position, a trader needs to buy the stock that they are shorting. This increases the demand for the stock and pushes the price higher still. More and more short sellers are forced to close their positions because of rising prices, which in turn pushes prices higher and forces out more short sellers.

This is known as a short squeeze.

Using risk management when short selling

Just like with a long position, you can use risk management to lock in profits or limit losses when trading short.

Risk management on a short position works the opposite way around to a long position. So where a stop loss order on a long position would be placed below the entry level of the trade, on a short position your stop loss would be placed above it.

Similarly, your take profit level would be at a lower price than your entry price.

How to trade IPOs – 3 ways to trade IPO stocks with Marketsx

IPO stocks can offer some of the biggest trading opportunities on the market. Initial public offerings, or IPOs, attract a lot of attention and the IPO market is closely watched to find the next big stock.

Marketsx gives you three ways to trade IPO stocks: CFDs on newly listed shares, grey markets to trade companies pre IPO, and the Renaissance Capital IPO ETF.

Trade IPO stocks the day they are listed

We are always adding new stocks to the platform, and this includes many newly listed companies following recent IPOs.

Traders have been able to trade CFDs on many IPO stocks on the day of their market debut.

Use grey markets to trade pre IPO

Can’t wait to start trading the next big IPO? With our grey markets, you don’t have to. Grey markets allow you to take a position on a company pre IPO by speculating on their eventual market capitalisation.

A company’s market cap depends on the price the company sells its shares for. Pre IPO, the company will give a target price range for its shares, and this will often be adjusted higher or lower to reflect market demand.

If you think the company’s eventual market capitalisation will be higher than is currently expected, you can trade the grey market long.

If you think the company is being overvalued, and its market capitalisation will be lower than expected, you can trade the grey market short.

In the past our clients have been able to trade companies such as Lyft, Uber, Peloton, Saudi Aramco, and Aston Martin pre IPO with our exclusive grey markets. We’ll keep our article on the hottest upcoming IPOs in 2020 updated with information about future grey markets.

Renaissance Capital IPO ETF

The Renaissance Capital IPO ETF allows you to trade the performance of the freshest stocks listed in the US.

It only features stocks that went public in the last two years so it is a great way to capture the performance of the newest companies on the market.

The most significant IPO stocks are added to the ETF straightaway, and the fund is updated quarterly to make sure it includes all the important stocks to go public recently.

Recent IPOs in 2020: What’s happened so far?

Although there have only been a few so far in 2020, recent IPOs have proven just how much pent-up investor demand there is.

Debut stocks surge as companies tap pent-up demand

It took a while for the IPO market to come back online in 2020, with the coronavirus pandemic slamming the brakes on many planned stock market debuts. But recent IPOs have shown that the demand has not gone away. Many of the companies who have gone public have seen an explosion of interest in their stock.

In fact, according to Renaissance Capital, the first week of June was the first time in two years that all the IPOs held raised more than original expected, whether because they ended up pricing above their target range, or because they increased the number of shares on offer.

2020’s recent IPOs

JDE Peet

JDE Peet held Europe’s largest IPO since 2018 when it went public at the end of May. The world’s second-largest packaged coffee maker raised nearly €2.3 billion. The investor roadshow was held virtually and it took just three days to sell all the shares – usually company management has to travel the world for at least a fortnight to meet investors and drum up interest.

ZoomInfo

ZoomInfo surged on its stock market debut. The company sold 44.5 million shares at $21 per share – above its target price range, which itself had been revised higher from an earlier range of $16-$18.

But even at the higher price investors snapped up the stock, causing it to open 90% higher on its first day of trading, with the first trade recorded at $40. This pushed the company’s market cap up from $8 billion to $14 billion.

Warner Music Group

The company sold 77 million shares – up 7 million from what was originally planned – at a price of $25 per share. This gave the company a market capitalisation of roughly $12.7 billion, and early trading on the day of the IPO saw this valuation surge 15% to just under $15 billion.

The company had initially signalled its intentions to go public in February, but the coronavirus pandemic meant this had to be delayed.

Pliant Therapeutics

Pliant had to double its share offering ahead of its IPO at the start of June, with the company raising $144 million against initial plans for $86 million. The company has said the proceeds of the floatation will last it until 2023.

Vroom Inc

Vroom raced higher when the stock went public on June 9th. The company prices its IPO at $22 per share, raising just under $500 million, giving it a valuation of $2.5 billion. The stock surged over 100% on the first day of trading, hitting $45.

Some of these IPOs have seen huge demand, but there’s still plenty more to come – check out the biggest 2020 IPOs investors can’t wait for.

IPO 2020: The upcoming IPOs every trader should watch this year

2019 was a bumper year for stock market debuts, but the IPO 2020 market was unsurprisingly frozen by the coronavirus pandemic during much of the first half of the year. However, recent IPOs indicate that the market might be starting to thaw, and there’s lots on the horizon for investors to get excited about.

The lack of initial public offerings means that there is a huge amount of cash sitting on the side lines. Recent IPOs have shown that investors are desperate for the next big opportunity. Several big names that were expected to debut in 2019 are now likely to go public this year. Upcoming IPOs investors are hoping for include Palantir, Airbnb, and DoorDash.

In this article:

  • 2019’s biggest IPOs
  • Upcoming IPOs in 2020
  • Airbnb IPO
  • Palantir IPO
  • DoorDash IPO

Uber, Lyft, Beyond Meat: Key IPOs of 2019

Uber and Lyft perfectly encapsulated the IPO market in 2019. These businesses were both “decacorns” – start-up companies with a valuation above $10 billion. Neither company was profitable, but investors were seemingly desperate to get hold the stock.

Lyft beat Uber to the punch, with shares trading publicly for the first time on March 29th. Uber listed on May 10th after having massively reduced its expectations – at one point the ride-hailing business had been expected to reach a valuation of $120 billion, but instead priced its IPO for a valuation of $75.5 billion. As of June 2020, Lyft was down over 50% on its starting price, while Uber was trading 13% lower than it’s debut.

Not every stock that went public in 2019 performed poorly. Beyond Meat was a breakout success. Since its debut the stock has surged over 140%. It is performances like this that make IPOs so attractive to investors.

By the end of the year, it was clear that markets were beginning to tire of companies with huge valuations but slim odds of reaching profitability any time soon. WeWork discovered this to its peril, after it was forced to abandon its plans to list publicly due to increased investor scrutiny over business practices and corporate structure.

Upcoming IPOs in 2020

There are many companies that are planning to go public in 2020, although there remains a lot of uncertainty as to how the coronavirus pandemic has affected these intentions.

In fact, many of the upcoming IPOs investors are discussing are from companies who have given no indication themselves that they are considering listing this year.

Here’s a look at some of the biggest planned, expected, or hoped for 2020 IPOs.

Airbnb IPO: Company to take advantage of turnaround in bookings?

Travel disruptor Airbnb was hit incredibly hard by the coronavirus pandemic as governments around the world initiated lockdowns to control the spread of Covid-19.

However, as global economies begin to reopen and lockdown measures are eased the company has reported a surge in bookings as consumers, tired of being stuck in their own homes, prepare for a domestic getaway. Between May 17th and June 3rd, the company saw more bookings in the US than in the same period during 2019. Bookings have also spiked in Germany, Portugal, South Korea, and New Zealand.

During April the company raised $2 billion in two separate tranches and cut staff numbers by 25% to help it survive the enormous impact of the pandemic. If the bounce back in bookings continues, markets may still witness the debut of Airbnb stock this year.

Airbnb launched in 2008 and now has over 150 million users who offer private rentals of apartments and rooms in over 65,000 locations across the globe. It includes Amazon founder Jeff Bezos amongst its early investors. By the end of 2019 analysts were expecting the Airbnb IPO to see the company achieve a valuation of $42 billion.

Palantir IPO: Secretive data company ready for the public eye?

While a Palantir IPO was rumoured in 2019, it has now become one of the most highly anticipated offerings of 2020, although it remains uncertain if the company intends to go public this year. Investors are desperate to get hold of Palantir stock despite the fact that much of the business remains shrouded in secrecy.

The big data company was founded by Peter Thiel in 2003, but is only just expected to break even in 2020, with the latest forecasts predicting $1 billion in revenue, up from $739 million in 2019.

The business does a lot of work with governments across the world, and has recently been involved with helping organisations such as the US Centres for Disease Control and Prevention and the UK National Health Service to monitor the spread of the coronavirus pandemic.

While chairman Peter Thiel told staff in September 2019 that there wouldn’t be a Palantir IPO in the next two or three years, the company began restructuring its employee compensation scheme this year to help it prepare for going public. According to various reports in June, Palantir was preparing to confidentially file for IPO.

Towards the end of June the company raised $500 million in private funding – likely to be its last round before it eventually goes public.

DoorDash IPO: Will confidential filing result in market debut?

With people trapped at home due to coronavirus lockdowns, food delivery services unsurprisingly saw a surge in orders. This has increased the scrutiny surrounding a potential DoorDash IPO. The company is believed to have nearly 40% of the food delivery market share in the US, operating in an intense sector against rivals such as Uber Eats and GrubHub.

The company last raised finance in November 2019, securing $700 million at a valuation of $13 billion. DoorDash announced at the end of February that it had confidentially filed for an IPO.

While this got investors excited, a confidential filing doesn’t necessarily mean there will be a DoorDash IPO. Rival delivery company PostMates filed for an IPO last year, but then decided to delay its public offering after raising additional capital privately.

A DoorDash IPO would give the company the capital it needs to defend its market share in the increasingly competitive market.

IPO: The ultimate trader’s guide to initial public offerings

An initial public offering or IPO can be an exciting trading opportunity. It’s the first chance that most investors and traders get to grab a slice of some of the hottest new companies.

But what is an IPO, and how does it work?

In this article:

  • IPO meaning
  • How does an IPO work?
  • IPO versus direct listing
  • Can I trade IPOs?

What is an IPO?

An IPO, also known as a flotation, is where a private company sells new shares to public investors. It’s a way of raising capital to fund further growth and innovation, and also allows existing investors to reap the rewards of backing the company during its start-up phase.

Up until this point, the company is privately owned by the people founded it, and any staff or early investors who were given shares.

How does an initial public offering work?

A company that wishes to go public will need to meet certain criteria laid out by the domestic market regulator – such as the Securities and Exchange Commission (SEC) in the United States. Companies can also choose what exchange they want to list on, such as the New York Stock Exchange or the NASDAQ, and these too have their own requirements.

Companies need the help of an underwriter or underwriters to hold an IPO. These are investment banks such as Goldman Sachs, Morgan Stanley, and JPMorgan, and are responsible for arranging and marketing the initial public offering.

It’s common for underwriters to assume all the risk of the IPO by buying all of the new shares being issued by the company, and then selling the stock to public investors.

IPOs: Roadshows and pricing

In the run-up to an IPO, a company will issue a prospectus and hold investor roadshows across the country in which it is listing in order to drum up interest in the flotation. The prospectus will give a target price range for the shares to be issued. This is often adjusted to reflect market demand as the company’s stock debut draws near.

Sometimes the stock of the company is so in demand ahead of its initial public offering that the company decides to issue more shares than originally planned – usually the underwriters are given the power to automatically increase the size of the issuance by a set amount of shares if demand warrants it.

Check out the upcoming 2020 IPOs to stay on top of the roadshows and pricing data of this year’s most anticipated public offerings.

What happens if demand is higher or lower than expected?

Although the underwriter buys the new shares at the final initial offer price, the stock can open above or below this price on its first day of trading. If the company going public and the underwriters have overestimated demand for the stock, the underwriter may have to sell the shares for a lower price than it bought them.

And if demand has been underestimated, the underwriter may be able to sell the stock for a much higher price than it bought them. Doing so is likely to damage their reputation, however, so underwriters have an incentive to try and sell the shares for as close to the initial offer price as possible.

What’s the difference between an IPO and a direct listing?

Companies who don’t want to hold an initial public offering may instead opt for a direct listing. With an IPO, the company going public is selling new shares, giving away control of more of the business.

A direct listing, on the other hand, is where a company allows its existing shareholders to sell the stock on public markets. This allows early investors to reap the benefits of backing the company, and allows the company to trade publicly without giving away control through the issuing of new shares.

A company does not need to hire underwriters in order to hold a direct listing – saving it a lot of money in fees. This also means existing investors may be able to sell their stock for a higher price.

Can I trade IPOs?

IPOs can represent some of the biggest trading opportunities on the stock market. Companies such as Beyond Meat have seen their stock surge since they went public, while others, like Uber and Lyft, have performed poorly.

With Marketsx you can trade companies before they go public with our exclusive grey markets, or trade CFDs on the hottest companies on the day they debut, as well as taking positions on ETFs that track the newest stocks on the market.

Building an equity trading strategy using the Insider Trades tool

Chief Market Analyst Neil Wilson shows you how the Insider Trades tool is a powerful decision-making tool for creating a robust equity trading strategy.

Starting trading equities with the Insider Trades tool today.

How to open a free MT4 or MT5 account on Markets.com

You can open a free MT4 or MT5 account with Markets.com, and it only takes a couple of minutes.

Open a free MT4 or MT5 account in the Marketsx trading platform

Here’s how to open an MT4 or MT5 account from within the Marketsx online trading platform.

 

Login to Marketsx

Once you’re logged in, head to the My Account dropdown menu in the top righthand corner of the trading platform. Click on My Accounts.

Create new account

Click on the Create New Account tab on the left side of the My Accounts popup, and select the type of account you want from the dropdown menu.

Set your preferences

Use the other dropdown menus to choose between a real or demo account, set your account currency, and choose your leverage.

Start trading with MetaTrader

You can fund your MT4 or MT5 account from within the Marketsx platform using the button next to your account details. You can also launch the MetaTrader Web Trader, or download MetaTrader to use the desktop application.

 

What is Stock Market Gamma?

Buried beneath the market lies a remarkable force. It lurks within the mathematical equations that govern derivatives. We’re talking about stock market gamma. It sounds geeky and boring but its impact is simple: when the market is positive gamma, it’s less volatile; when it’s short, things can get moving. It creates a feedback loop. Welcome to the power of gamma.

What is stock market gamma, then?

Put simply, gamma is the change in an option’s delta for a given move in the price of the underlying asset. If you think that doesn’t sound simple, you’d be right.

Let’s go back to the basics of how derivatives work. Once we know that, we will explain how it affects the whole market.

Options

As you know, options are instruments that give the owner the right, but not the obligation, to buy or sell the underlying asset. As the name suggests, they give you a choice. For example, a call option on 10,000 shares of Apple is the right to buy those shares in the future at an exercise price that we strike today. You might decide not to exercise that right when the time comes, because markets move around. That’s very different to just buying Apple today. You own it at today’s price. The option gives you much more flexibility.

Pricing

The flexibility that comes with an option means that it’s more complicated to determine its price. A share in Apple is $315. That reflects the equity value of the company. But an option on Apple? There’s more factors to consider. More uncertainty about the future. What happens if markets get more volatile? What happens if your option is long rather than short dated? What interest rate would your money earn at the bank if you left it there and didn’t own this option? All of this was boiled down into the Black-Scholes Options Pricing model, which took into account the volatility of the asset, the length of time until the option expired, and the risk-free rate, amongst other factors.

The Greeks

The price of a share in Apple can go up or down. But with options all of these other factors can go up or down. That means managing the risk of an option is more complicated. A market-maker in Apple stock just has to cover the bid-offer spread. But a market-maker in Apple options has to consider how to cover all these other factors, like how volatility moves and time ticks by until the options expire. But don’t worry, because there’s a mathematical model to cover all of that too. And each factor is represented by a Greek letter.

Why are the Greeks important for trading stocks?

Options market-makers spend their time trying to cover all of their Greek risk. Think of it like a game of whack-a-mole: they flatten their exposure to time, but then exposure to volatility pops up. They flatten that, but then exposure to interest rates pop up. It’s much more exhausting than just simply being exposed to a stock price going up or down. But it also offers plenty more opportunities to make money.

Delta

You might remember Delta from your algebra classes where it simply refers to a “change”. When it comes to derivatives it refers to how the price of the option changes as the underlying asset price changes. So when the price of Apple moves, the price of options on Apple changes by its delta.

Gamma

Now we are back to where we started. Stock option gamma is the change in delta. Once market-makers know this number, they can automatically hedge their positions. The game of whack-a-mole requires hardly any effort. Just set the machines to calibrate the maths, and bingo their positions are covered.

How the financial crisis affected stock market gamma

For a long time gamma in the stock market didn’t matter much at all, except to the option nerds like those of us at BlondeMoney. But then something happened. After the financial crisis, more and more cheap money was pumped into the system. The authorities wanted to make sure that we would all take risk, and lots of it. If not, we could have disappeared into a debt deflation trap out of which we might never have recovered. This effectively mandated the short volatility trade, distorting the price of risk.

Remember that volatility affects the price of options. As everyone sold volatility, market-makers owned something that kept falling in price. They had to cover this risk. In the game of whack-a-mole, the little blighter marked volatility kept popping up no matter how hard they tried to shove it back down. It meant that every day volatility fell, they didn’t want to be left holding the long volatility hot potato.

What does positive gamma mean?

When market makers own all this volatility, they are positive gamma. To try and eke out some kind of return from this position, they have to buy low and sell high. And if prices aren’t moving around much, because it’s all lovely-wonderful-happy-no-volatility-in-sight times, then they have a smaller and smaller range out of which to make money. They’re all buying just below the market and selling just above, which tightens the range even further, making a rangebound market trade in an even tighter range.

Welcome to the power of gamma. It’s a feedback loop – a stock market gamma trap.

What happens to gamma when the stock market receives a big shock?

Suddenly there is a lot of volatility. People want to own it, and that leaves the market makers short of volatility just when it’s going up in price. To cover this position, their gamma exposure in the stock market reverses. They are buying as the market goes up and selling when it goes down. Gamma can also be a negative feedback loop.

Why is gamma in the stock market so powerful?

When everyone has the same position at the same time, and covers it the same way at the same time, its impact is magnified. That’s why stock option gamma is now such a powerful force. Everyone has the same mathematical models automatically hedging volatility positions the same way at the same time.

Has this changed since the stock market sell off?

No. In fact, the big switch from positive to negative gamma on the S&P500 helped to exacerbate the sell off. All that’s happened since then is renewed intervention from the authorities, which has started the short-volatility trade off again. The market is now in positive gamma territory, so it will be less volatile until there’s another unexpected shock. Like, say, a huge corporate earnings recession in the teeth of the worst economic downturn of our lifetimes.

But, even then, for this to cause a market crash, we would have to see gamma turn negative.

In conclusion, gamma is a powerful force and we ignore it at our peril.

How trading stocks works

Trading stocks involves buying and selling the stock of publicly-listed companies in order to potentially profit from favourable changes in price. There are thousands of stocks to choose from, across dozens of industries, but while each stockfundamentals may differ, there are some basic principles that govern how trading stocks works. 

How Trading Works in the Stock Market 

Stocks, also known as shares or equities, grant the holder ownership of a fraction of the company issuing the stock. Investors in Amazon own a small piece of Amazon. This grants them rights, such as the right to vote on certain business decisions. Some shareholders also receive quarterly payouts called dividends. But traders buy and sell stocks primarily to benefit from the changes in price. 

There are two ways that stocks are traded: via exchanges, or over the counter (OTC). 

Likely the most well-known example of how trading works in the stock market is the New York Stock Exchange (NYSE). As the name implies, this is an exchange-based method of trading, where buyers and sellers come together on the trading floor to place trades. 

Brokers take orders from their clients and pass these on to the traders on the floor, the floor traders then find a trader who wants to make the opposite trade (so a trader looking to buy Facebook shares needs to find a trader whose client has Facebook shares they are looking to sell) and conducts the trade. 

Many exchanges, like the Nasdaq, conduct trades electronically, matching buyers and sellers without them having to physically meet. 

Over the counter trades are those made directly between parties, without an exchange acting as a market maker between them. Trading stock CFDs with Marketsx is an example of an OTC trade. 

Trading Stock CFDs 

Contracts for Difference (CFDs) are derivatives that track changes in price of an underlying asset. A stock CFD will move up if the underlying stock appreciates in price, and move down if the same asset depreciates. 

Trading stock CFDs has many advantages over buying and selling shares directly. Trading CFDs allows you to short a stock as well as going long. They also allow you to take much larger positions in a company than your capital may allow thanks to leverage, especially considering the stock of some companies trades for hundreds, or even thousands, of dollars per share. 

Remember, leverage can increase your losses as well as your profits. 

Making a stock trade 

Trading stocks on the Marketsx platform is a straightforward process. Search or browse for stocks to trade, then click on the Buy or Sell button above the stock chart. You can also open a position by right-clicking on the chart. 

The order ticket contains all the information you need to confirm the trade. Set the desired trade size and click the button to place the trade. The order ticket also allows you to set stop loss and limit orders.

When your position reaches a desired level of profit, or losses are too high, you can close the position with the click of a button.

How Trading Works

Trading is where you buy or sell a stock, currency pair, commodity, or other financial instrument, to try and make a profit from changes in its price. Read on to discover how trading works, from markets and brokers to the kinds of instruments you can trade and the ways to trade them.

Trading: How it works

There are two ways to conduct a trade on the financial markets: through an exchange, or over the counter (OTC).

Exchanges are marketplaces designed to facilitate trades of a certain type of instrument, like the London Stock Exchange, or the Chicago Mercantile Exchange. They work by matching traders who wish to buy a particular asset with traders who are looking to sell the same asset.

A trade made directly between two parties is known as an over the counter trade. Placing trades with a broker is an example of an OTC trade.

What can I trade?

With a Marketsx account you can trade stocks, forex, indices, commodities, cryptocurrencies, ETFs and bonds. You can also trade special combinations of stocks called Blends.

What you choose to trade will depend upon your personal preference and trading style. Some traders specialize in one or two asset classes, while others have more varied portfolios.

Online trading platforms

The internet has made trading faster and much more accessible. Online trading platforms, like Marketsx, give you access to markets across the globe.

Once you have created and funded your trading account, you will be able to:

  • See real time price quotes and price charts
  • Buy and sell instruments
  • Access powerful sentiment and news tools that can help you make trading decisions
  • Manage your portfolio
  • Set up alerts to track the financial markets
  • View your profit and loss

With online trading you can trade where and when you want; Marketsx is available via desktop and mobile web, and as a mobile app, allowing you to stay on top of the markets and manage your portfolio wherever you are.

Trading Explained: Bid and Ask Prices

When trading any type of instrument you will be presented with two prices: the bid and the ask price. The bid is the maximum price that the market is currently willing to pay for the instrument, while the ask price is the minimum price that the market is willing to sell the same instrument for.

If you want to buy the instrument, you would pay the ask price. If you wished to sell it, you would receive the bid price.

The difference between the bid and ask prices is known as the spread. How often the price changes will depend upon an asset’s liquidity.

Long positions and short positions

There are two directions that you can trade an instrument: long and short.

Going long means that you are buying the instrument in the hope that its value will increase and you can sell it on for a profit.

Going short, or shorting, is where you sell a borrowed instrument in the hope that the price will fall and you can buy it back for a lower price, keeping the difference between the two transactions as profit.

In the Marketsx platform you would use the buy button to enter a long position, and use the sell button to enter a short position.

Completing a trade is known as closing the position. It is also referred to as taking profit.

Contracts for Difference (CFDs)

Marketsx offers you the chance to buy and sell contracts for difference. A CFD is what is known as a financial derivative, because it derives its value from an underlying asset.

For instance, Apple CFDs track changes in the price of Apple stock. When Apple stock rises, so does the CFD, and when the stock price falls, the CFD does too. Trading CFDs means you don’t own the underlying asset, and it has many advantages.

One of the main benefits of trading CFDs is that you can make your capital go further with leverage. Leverage is where you put down a portion of the position’s value, rather than the entire sum, allowing you to take larger positions than you might otherwise be able to.

Learn more about trading CFDs here.

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Products

  • CFD

Markets.com, operated by Tradetech Markets (Australia) Pty Limited (‘TTMAU”) Holds Australian Financial Services Licence no. 424008 and is regulated in the provision of financial services by the Australian Securities and Investments Commission (“ASIC”).

FSCA (ZA)

  • Clients’ funds kept in segregated bank accounts
  • Negative Balance Protection

Products

  • CFD
  • Strategy Builder

Markets.com, operated by TradeTech Markets (South Africa) (Pty) Limited (“TTMSA”) Regulated by Financial Sector Conduct Authority (‘FSCA’) under the licence no. 46860.

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