Though day trading is not illegal or unethical, it can prove very risky. Because most day-trading strategies employ leverage in margin accounts, day traders can potentially lose more than they have invested and end up in significant debt.
Category: stock trading FAQ’s
When it comes to this question, the answer really depends on who you ask. If we are only looking at the broader indices, you would without hesitation say it has been great to be an investor in the stock market today. With the broader indices continuing to make new all-time highs, many investors may be seeing strong gains in their portfolio this year. After all, the S&P 500 is up by over 11% this year alone. Taking a step back, the unprecedented recovery we saw in March 2020 had caught a lot of investors’ attention. 2020 was certainly the year many new investors came to the stock market for the first time. And for good reasons.
One of the most concentrated investments has been on stay-at-home stocks. This came after many investors were quick to jump into some of the top growth stocks in the stock market. For example, stay-at-home plays such as Zoom (NASDAQ: ZM), Netflix (NASDAQ: NFLX), and Peleton (NASDAQ: PTON) are those that benefit from the stay-at-home measures in place during the lockdowns. If you got in shortly after the stock market crash in March 2020 brought on by the coronavirus pandemic, you would have reaped significant profits. You would still be sitting on nice gains despite the correction in growth stocks in the past few weeks.
But in the stock market today, tech and electric vehicles may no longer be the only sectors you need to go for growth. With Biden’s infrastructure bill, industrial stocks have also been in the limelight. Given the strong uptick in vaccination rates in the U.S., there has also been an ongoing rotation from hyper-growth stocks like tech stocks to reopening stocks. The latter include the likes of stocks in the tourism and airline sectors. Nevertheless, many parts of the world are not exactly out of the woods yet with regards to the pandemic. Therefore, one should tread cautiously even with reopening stocks. These are interesting times in the stock market, and we hope you have a fruitful journey.
What Are U.S. Stock Futures?
Before knowing what U.S. stock futures are, it is important to understand the definition of futures. Futures generally refer to a contract that stipulates the buying or selling of a specified commodity for a certain price at a specific point in time in the future. So, what does it mean when the futures trade higher ahead of the opening bell? It simply means these indices will trade higher following the opening bell. Simply put, it is an indication of how the market sentiment will be when the market opens.
You can trade stock futures on major U.S. stock exchanges just like you would do with traditional stocks. These major futures contracts are traded on the CME Globex system and are called E-mini contracts. The most common U.S. stock futures are the following:
- Dow Futures- a contract based on the widely followed Dow Jones Industrial Average (DJIA), an index of 30 major U.S. companies. The value of one Dow Future contract is 10 times the value of the DJIA. For example, if the DJIA is trading at 33,000, the price of one Dow Future is $330,000.
- S&P 500 Futures- S&P 500 futures contracts are agreements to buy or sell stocks listed on the S&P 500. As its name suggests, it’s an index made up of stocks of the 500 largest US companies. Unlike the stock exchange, S&P 500 futures traders are active five days a week, for 23.5 hours per day, plus Sunday evening.
- Nasdaq 100 Futures- Nasdaq 100 contracts track the stock prices of the 100 largest companies listed on the Nasdaq Stock Exchange.
You are now ready to put your money into the best wealth generator: the stock market. The question here is how to invest in the stock market for beginners? How to invest money in the stock market for beginners can be confusing at best. Investing requires you to set aside money while you are busy with life and have that money work for you so you can reap the rewards of your labor in the future.
Let’s assume you have set aside $10,000, and you’re ready to enter the investment world. So, what happens next? The decision to hire a financial advisor or to simply do the research on your own to pick the best stocks to buy is entirely up to your own free will. Investing in the stock market might be easier than many would’ve thought as all you need is an online brokerage account to get started. There are, however, a set of questions you need to ask yourself before embarking on the investing journey.
- What kind of Investor are you?
- Which online brokerage account would be best for your goals?
- How much money are you setting aside for stock investing?
- Are you planning to invest in stocks, mutual funds, or ETFs?
- Short-term or long-term investing?
- How are you planning to manage your portfolio?
As mentioned above, the regular trading days closes at 4 p.m. Eastern time. However, on early-closure days, which are typically right before or right after a market holiday, the markets will close early, usually at 1 p.m. EST.
There are also ‘after-hours sessions’, which typically span from 4 p.m to 8 p.m Eastern time. It’s worth mentioning that these trades taking place outside regular hours are made over electronic communication networks (ECNs), which allow buyers and sellers to connect directly rather than via a middle person. While this type of trading was previously only accessible by large institutional players, there are increasingly more brokers such as Interactive Brokers and Fidelity which can facilitate this type of trading today.
When does the stock market open? This may seem like a simple question, but the answer isn’t as straightforward as you’d think. The regular trading hours for the U.S. stock market, including the New York Stock Exchange and the Nasdaq are from 9.30 a.m. to 4 p.m. Eastern time on weekdays (apart from stock market holidays).
But what if I told you trading can also occur outside normal stock market hours? For instance, on regular market days, there is ‘pre-market trading. While the hours may vary, they can start as early as 4 a.m. while most pre-market trading takes place between 8 a.m up until regular trading hours begin at 9.30 a.m.
It is also worth mentioning that the stock market isn’t exactly like a grocery store. To buy and sell stocks, you need to go through an intermediary known as a licensed brokerage. That’s because the stock market is a secured and regulated environment where market participants can trade shares with low, if not zero operational risk.
The stock market also acts as primary markets and secondary markets. Now, what do I mean by that? For starters, the primary market is where shares are issued and sold to investors for the first time through the process of an initial public offering (IPO). If you’re passionate about getting into the investment world, you may have heard about the most recent popular IPOs like Airbnb (NASDAQ: ABNB) or Roblox (NYSE: RBLX). Above all, this process allows companies to raise capital from investors.
Following the IPO process, the stock exchange serves as a trading platform that facilitates regular buying and selling of the listed stocks. This constitutes the secondary market. The stock market exchange earns a fee for every transaction that occurs on its platform during the secondary market activity. When buying stocks on the primary market, investors are purchasing stocks directly from the issuer. The secondary market is where existing stocks are traded between investors or traders.