How would I go about trading equities? | Forex Factory

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How would I go about trading equities?

  • #1
  • First Post: Mar 5, 2013 4:47pm Mar 5, 2013 4:47pm
Hello,

I'm interested in trading equities, but if I understand it correctly, it's far more complicated than trading forex.
As I have no decent idea of how it works, I thought you guys could help me out.

1. How does it work when I want to buy/sell? Is it like forex or do I have to do something else to go short?

2. Is there a spread, set commission or otherwise I have to pay when placing a trade?

3. What brokers offer equity trading? And what hours can I trade them? (I live in sweden (GMT+1) and I'm particularly interested in the E-mini S&P 500 equity)

4. How does ticks and "points" work in equities? Is a tick like a tick in forex, i.e. 1/10 of a pip (or in this case a point)?

5. What else do I need to know before trading equities that applies/does not apply to forex? Pros/cons?

Any help appreciated
  • #2
  • Mar 5, 2013 10:42pm Mar 5, 2013 10:42pm
Quoting Finoli
Hello,

I'm interested in trading equities, but if I understand it correctly, it's far more complicated than trading forex.
As I have no decent idea of how it works, I thought you guys could help me out.

1. How does it work when I want to buy/sell? Is it like forex or do I have to do something else to go short?

2. Is there a spread, set commission or otherwise I have to pay when placing a trade?

3. What brokers offer equity trading? And what hours can I trade them? (I live in sweden (GMT+1) and I'm particularly interested in the E-mini S&P 500...
Let me first say this - I don't trade equities. But I can probably answer a few of these anyway.

2) There will be either a commission or a built in fee much like forex...which one you get is going to depend on your broker. Spread will always exist because there's logically going to be a (small) gap between the nearest willing seller and the nearest willing buyer.

3) As far as I'm aware every major bank offers equity trading...I know mine does anyway. eTrade and AmeriTrade are heavily advertised ones in the US. Just make sure whichever broker you choose is certified by the appropriate oversight agency to avoid bucketshops and scams. Hours of trading are dictated by the exchange you're trading on. If you're trading the NYSE for example you have to trade the hours it's open, which for that exchange is 9:30AM to 4PM EST. Stocks traded in Frankfurt on the other hand may be more of your cup of tea timeframe wise.

4) A tick is an update in price, it's not necessarily any fixed increment.

Hope that helps some, even if it's not a complete or expert answer to your questions.
  • #3
  • Mar 5, 2013 11:39pm Mar 5, 2013 11:39pm
Hi,

Some answers to your questions:

1. I believe that you mean equity index futures (you used E-mini S&P as an example), not cash equities. There are futures based on numerous equity indices--some most liquid ones are E-mini S&P, Nikkei, etc. Yes, as with any other futures contracts, you can go short. Just sell at the bid prices. Of course, once you do that you're now short the contract and will have to cover at sometimes in the future.

2. In the futures markets, there are natural spread between the bid and offer prices. But for liquid instruments like E-mini S&P, the spread is never more than one tick (the minimal movement for that futures product--for E-mini S&P, it's US$0.25). In addition to the spread, you'll have to pay commission to your broker and is charged per contract trade. It varies according to the broker you choose.

3. I heard Interactive Brokers are good, but never used them. E-mini trade virtually 24 hours.

4. Explained the concept of tick above.

5. For position traders, equities markets tend to be more micro and bottom-up (corporate earnings, etc) while forex tend to be more macro (interest rates, unemployment, etc). But, for really short-term traders, I see no differences, just a lot of technical analysis.

Hope this helps.


Quoting Finoli
Hello,

I'm interested in trading equities, but if I understand it correctly, it's far more complicated than trading forex.
As I have no decent idea of how it works, I thought you guys could help me out.

1. How does it work when I want to buy/sell? Is it like forex or do I have to do something else to go short?

2. Is there a spread, set commission or otherwise I have to pay when placing a trade?

3. What brokers offer equity trading? And what hours can I trade them? (I live in sweden (GMT+1) and I'm particularly interested in the E-mini S&P...
  • #4
  • Mar 6, 2013 1:12am Mar 6, 2013 1:12am
Very helpful, thank you
  • #5
  • Mar 6, 2013 1:40am Mar 6, 2013 1:40am
Quoting Finoli
Very helpful, thank you
Always glad to help when I can. Hopefully someone else knows the answers to the other questions.
  • #6
  • Mar 7, 2013 3:16am Mar 7, 2013 3:16am
Quoting Finoli
Hello,

I'm interested in trading equities, but if I understand it correctly, it's far more complicated than trading forex.
As I have no decent idea of how it works, I thought you guys could help me out.

1. How does it work when I want to buy/sell? Is it like forex or do I have to do something else to go short?

2. Is there a spread, set commission or otherwise I have to pay when placing a trade?

3. What brokers offer equity trading? And what hours can I trade them? (I live in sweden (GMT+1) and I'm particularly interested in the E-mini...


1. You cannot technically Short a stock but you can do so if you use CFD of the the stock.

2. Usually for equity trading there will be additional commission.

3. There are many brokers out there offering equity trading, you just need to search on the web. Equity trading is dependent on the stock exchange opening hours.

4. Stocks have tick size of 0.01. Forex pairs have pip size of 0.0001 or 0.01 (for JPY pairs).

5. For forex you can execute your trades 24 hours a day but for equity is is dependent on the stock market operating hours.
  • #7
  • Mar 8, 2013 5:30pm Mar 8, 2013 5:30pm
Trading Equities..

1) Equities require a lot more information to trade efficiently.

2) The is manipulation in both but equities will have the higher amount.

3) Analysts work for large Wall Street firm. Wall Street firms have bias. Analyst (many times ) will have the same bias.. Enron comes to mind.

4) Stocks have all manner of additional info that effect it's movment. P&E, Cash flow, Management, Sales, Market Share, Shares outstanding, Shares available, Traded Volume, Sector, Industry...Specialists, Bid / Ask Spread, etc.


The point.. Way too many opportunities for manipulation IMHO... This is not to say that Forex and Commodities do not have their share..just not as much.

Now for the Biggie !!! 25K account required to trade stock as a pattern day trader. Forex and Commodities can be significantly less.

I started out trading indexes / E Mini = SP back in 99' NQ and Russell later on..and still do today. Reason: Something I call price stability...Look at an Index Chart then look at some Equities Charts.. You will see a big difference in how price acts ( stability ) most of the time. Additionally you do not have the liquidity issues that you may run into due to size of your account as it relates to R/R %.. Indexes ( majors ) do not have the liquidity issues.. Depending on what time of day you are trading.. If your trading mini's in the overnight market then maybe yes. You able to trade with $$ at risk ( assuming your R/R % is correct to your account size )

I now trade Forex as well. The trading enviroment ( Brokers, Spread, Platforms ) has changed for the better compared to just 5 years ago.. For the record, I was originally taught by a Forex trader in CA back in 99' but moved to Indexes due to the difficulty of Forex then.

Lastly, depending on where you are in the world will greatly determine your trading. You may find that trading at a certain hour is not to your liking.

Just my 2 pips

Good Luck Learn as much as you can.. Be patient !!!!

TSD
  • #8
  • Mar 11, 2013 10:12am Mar 11, 2013 10:12am
Trading equities is similar and different from FX in some ways.
1) there is a spread just like in forex.
2) same technical analysis..if you use a retail broker, then you will analyze the
market on the same MT4.

3) unlike forex with a .0001 quote, equities only have .01
4) The equities market is usually more responsive to fundamental news than the currencies market.
  • #9
  • Mar 22, 2013 10:59pm Mar 22, 2013 10:59pm
5. What else do I need to know before trading equities that applies/does not apply to forex? Pros/cons?

=== > Most brokerage firms will ask you to have at least USD 25,000 to day trade equities...

Leverage is way lower than Forex, usually you need to pay about 30% of the equity price, as opposed to Forex where you pay 5% or even 1%
  • #10
  • Mar 24, 2013 7:03am Mar 24, 2013 7:03am
Quoting forexoz
5. What else do I need to know before trading equities that applies/does not apply to forex? Pros/cons?

=== > Most brokerage firms will ask you to have at least USD 25,000 to day trade equities...

Leverage is way lower than Forex, usually you need to pay about 30% of the equity price, as opposed to Forex where you pay 5% or even 1%
Dude...trading equities is on another realm when compared to trading FX. You don't need leverage when trading equities as they tend to be more volatile. The current minimum is 25k and can be leveraged on a day trading basis to 4:1 and an overnight basis of 2:1. Interactive brokers offers leverage are below < 2% interest per annum.
  • #11
  • Mar 26, 2013 12:32am Mar 26, 2013 12:32am
Equities obviously gives you access to dividends and ownership to a company and is a great opportunity if you believe that the underlying stock will increase. Unlike FX, Equities provides you with access to more options. If you look at the ASX, by trading Equities, you’ll get access to over thousands of listed stocks in the exchange.
FX Currencies are limited to the number of currency pairs which you can trade therefore may be limiting. This will depend based on the online broker you choose to trade with.

Equities are volatile as it gets affected not only my macro news but also specific news. Although the macro news may be positive, Equities doesn’t necessary get affected, they are more sensitive to company announcements. FX, currency market is the biggest in the world and also the most liquid. The only thing that can affect these are the macro news such as employment figures etc.
  • #12
  • Mar 26, 2013 1:57am Mar 26, 2013 1:57am
Quoting jcurrent
Equities obviously gives you access to dividends and ownership to a company and is a great opportunity if you believe that the underlying stock will increase. Unlike FX, Equities provides you with access to more options. If you look at the ASX, by trading Equities, you’ll get access to over thousands of listed stocks in the exchange.
[color=#1f497d][font=Calibri][size=3][font=Calibri]FX Currencies are limited to the number of currency pairs which you can trade therefore...
+1

I agree.

Writing on the advantages of equities when compared to the FX market is exhaustive, hence the development of micro and macro economics. One isn't better than the over because they are interrelated, it all boils down to preference.
  • #13
  • Apr 2, 2013 6:57pm Apr 2, 2013 6:57pm
Exactly, preference and how much of a risk taker you are.
  • #14
  • Jul 23, 2013 9:35am Jul 23, 2013 9:35am
Quoting Finoli
Hello, I'm interested in trading equities, but if I understand it correctly, it's far more complicated than trading forex. As I have no decent idea of how it works, I thought you guys could help me out. 1. How does it work when I want to buy/sell? Is it like forex or do I have to do something else to go short? 2. Is there a spread, set commission or otherwise I have to pay when placing a trade? 3. What brokers offer equity trading? And what hours can I trade them? (I live in sweden (GMT+1) and I'm particularly interested in the E-mini S&P 500 equity)...
Trading equities is a much more complicated (but in some ways easier once you learn it) market. I would not try going it alone. Get help from a site like Pristine or Tradesight (google them). They do this for a living.
  • #15
  • Jul 30, 2013 4:56am Jul 30, 2013 4:56am
I trade the indices for S&P, Russel and Nasdaq using the emini's at about $12.50 a tick.

With my broker (Optimus Futures) I opened an account with $7500 but I think the minimum is $5k so it can be done quite affordably.

It is no different really than the Forex spot market other than I find price action to be smoother. There are other differences but to be honest a market is a market and they do not vary that much.

A big plus for me is that these markets are traded from a central exchange whereas Forex is a singular market with little governance. In other words being "stop hunted" is a reality in Forex whereas it's a lot less likely from an exchange.

I started my trading life in Forex but now trade that alongside emini's and in each market I use the pipdaq setups which works well in each. This is on H4 and M5 in Forex and 1500 tick charts in emini.
  • #16
  • Last Post: Aug 10, 2013 12:54am Aug 10, 2013 12:54am
Quoting Finoli
Hello, I'm interested in trading equities, but if I understand it correctly, it's far more complicated than trading forex.
Not sure if it's more "complicated". Just different.

Quoting Finoli
As I have no decent idea of how it works, I thought you guys could help me out.

1. How does it work when I want to buy/sell? Is it like forex or do I have to do something else to go short?
You can buy any stock, but not every stock is shortable. Typically all large cap stocks are always shortable (e.g. Apple, Google, Bank of America, VISA etc), but small cap stocks are often not shortable. Short availability depends on the broker. The trading platforms tells you whether a stock is currently shortable or not.


Quoting Finoli
2. Is there a spread, set commission or otherwise I have to pay when placing a trade?
Unlike Forex the spread for US equities is NOT broker dependent. It's determined by the exchange. it is a REAL ecn. So you'll see the same spread on AAPL (Apple Inc) on TD Ameritrade, Etrade ot Interactive Brokers. However the commissions vary between brokers

Quoting Finoli
3. What brokers offer equity trading? And what hours can I trade them? (I live in sweden (GMT+1) and I'm particularly interested in the E-mini S&P 500 equity)
E-mini is a futures contract, and can be traded 24 hours a day, 5 days a week. The large volume occurs when between 9:30 and 4:00 EST i.e. when the stock market is open.

US Stocks, mostly traded between 9:30 EST (open) and 4:00 EST (close), although many stocks can trade in the pre-market (starting 4AM EST), and after-hours (up to 8PM EST).

US Stock options can only be traded from 9:30 to 4:00 EST


Quoting Finoli
4. How does ticks and "points" work in equities? Is a tick like a tick in forex, i.e. 1/10 of a pip (or in this case a point)?
With the e-mini futures contract, a tick is 0.25.

With equities, it's really just the price in cents rather than pips. So AAPL might be trading at 454.45/454.60 i.e. have a 15 cent spread.

Quoting Finoli
5. What else do I need to know before trading equities that applies/does not apply to forex? Pros/cons? Any help appreciated
I used to only trade forex, but over the past year or so I've moved over to US equities. It was the best decision I ever made.

Pros
- Much better brokers. No spread variation between brokers, and less hassle compared to forex brokers. (in my experience at least)
- In general, Support/Resistance levels are more reliable in equities compared to forex.
- Access to level 2. You can see the time and sales and market depth on any stock or futures contract. You can't with spot forex.
- Can use US stock options to leverage the trade. This is what I do.

Cons
-If you're a day trader, you need more than 25k USD in the account to avoid the pattern day trader rule. Below this level, you're restricted to how many trades you can place in a 5 day period. There's no such restrictions with forex. And you can open an account with just a few hundred dollars, and trade as often as you want.
-Can't trade 24 hour a day. There's always a risk holding a stock or options position overnight, because a news event might occur that causes the market to gap against your trade. With forex you can trade 24 hours a day.
-Less leverage than forex. Some brokers offer 1:4 leverage on large cap stocks, but generally it's 1:1. However, you can get massive leverage if you are able to trade the underlying option.


But like any form of trading, the most important thing is that you develop a strategy that gives you a statistical edge. Doesn't really matter what you trade - forex, stocks, futures, options or bonds. Finding that "edge" is the tough bit. I just found it much easier to do with US stock/options than forex, although I'm sure others may have had the reverse experience.
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