Candlestick Trading Blog

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Trade Stocks – Types of Stocks to Trade

In order to trade stocks it is important to understand the different types of stock available to the investors to trade. In today's article we will discuss two types of stocks as well as the different stock sectors used to classify stocks.

There are two types of stock including preferred stock and common stock for investors who trade stocks. The majority of investors own common stock. Preferred stock represents a degree of ownership in a company and the company has the option to purchase shares from shareholders at any time for any reason. Preferred stock has fewer rights than common stocks except in regards to dividends. Companies that issue preferred stock pay consistently with dividends and preferred stock has first rights to dividends over common stock. Also, in the event of liquidation, preferred stock shareholders are paid before common stock shareholders.

Investors who trade stocks in common stocks are of the majority of stocks traders. Common shares represent ownership in a company and claim on a portion of the profits through claiming stock dividends. Investors invested in this type of stock get one vote per share to elect board members who will ultimately oversee any major decisions made by management of the company. This type of stock is mostly held by the public and is the when people refer to stocks they are typically referring to common stocks. They provide higher returns than with higher risk. For example, in the event of liquidation of the company, shareholders will not receive money until the creditors, preferred shareholders and the bond holders are paid.

Investors who trade stocks classify stocks by the type of business. Companies are grouped together by industry including eleven different sectors. These eleven different sectors fit into one of two groups including cyclical and defensive stocks. Cyclical stocks include nine sectors are include everything else other than utility companies and consumer staples, which are defensive stocks.

The list of cyclical stocks for investing money include the following:

1) Basic materials
2) Communications
3) Capital Goods
4) Energy
5) Financial
6) Transportation
7) Consumer Cyclical
8) Health Care
9) Technology

The cyclical sectors are considered cyclical because they tend to move up or down in relation to business cycles or other influences.

Defensive stocks include consumer staples and utilities as mentioned above. These stocks are used in defensive investing because they can potentially provide protection in a falling market. They balance out portfolios as a result because people will always eat food and need energy. They will however fail to climb with a rising market, so it is important to ensure portfolio diversification by investing in other types of stocks and stock sectors when you trade stocks.

The above provides basic definitions for common stocks, preferred stocks and the different stock sectors available to the investor. Continue to read about the different types of stock investing so that you ensure that you have strong portfolio.

Online Brokers – Factors to Consider

When looking at your options for online brokers there are various factors to consider. It is very important that you do your research as this is one of the most important decisions you will make when you begin to invest in stocks online. Your online stock broker will be responsible for tasks such as storing your personal information, executing your trades and maintaining your account balance. In today's article we will look at factors that every investor should consider when looking to select a broker online.

Full Service or Discount Brokers
Your experience level will determine the type of broker that you should select. The more experienced investors will most likely opt to use an online discount broker. Discount brokers offer services at discounted prices because they don't offer investment advice like full-service brokers. Discount brokers simply place your trades per your instructions whereas full-services brokers will not only place your trades, but will advise investors when they have questions. Beginner investors often opt to utilize the services of full-services online brokers.

Research and Referrals
It goes without saying that you must research as much as possible different brokerage firms that you are considering. Many investors will speak with successful traders who they network with to find out what brokerage firm they use, how they feel about the firm, and the type of services offered. This can help narrow down the search tremendously.

Fees
It is very important to understand the different types of fees associated with each brokerage firm. Not only do you need to research the fees but you must also find out what features each firm offers. You don't want to go with the most expensive investment broker, but you also don't want to go with the cheapest either. The key is to find a reputable firm that offers the services that you desire at reasonable costs.

Deposit
In addition to finding out the fees associated with the online brokers that you are researching, you must also find out the minimum deposit amount that each firm requires to set up a trading account. You will find that some firms don't requires a minimum balance at all for online investing, while others require a minimum balance of a couple thousand dollars . Again, the key is to find a reputable firm that is not at opposite extremes.

Customer Service
This is a major factor when choosing a broker. Many times potential customers will call the customer service number to find out how long it takes for a representative to answer the phone. Not only do they measure how long it takes to answer the phone, but they call prepared with questions to find out how knowledgeable and helpful the representatives are, not to mention how friendly they are as well.

Site Reliability
This factor is crucial to your success when making an online investment. Before signing up with a brokerage firm, ask for a trial period. During this trial period you can assess the performance and reliability of the site. Does it have a lot of down time? Is it a system that is user friendly and intuitive? Finding a trading system that you can use it crucial to your success. 

Selecting a broker online takes a lot of time and effort. They key is to putting in that time upfront, instead of finding out later that you made the wrong decision. There are numerous online brokers available and with patience and due diligence you will find one that works for you.