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Advantages and disadvantages of investing in the stock markets

As we have just briefly stated, investing in the stock markets is far easier nowadays than before, anyone who wants to can now access the major stock markets worldwide. But this type of investment has both advantages and disadvantages that we will explain in a more detailed manner so you can understand the possibilities and risks that investing online entails.

• When your implemented trading strategies are comprehensive and effective, investing in shares on the stock markets can provide a better return on your capital than many of the savings plans offered by banks.
• We should also remind you that compared to other types of assets, stock market shares can be analysed using financial and economic information concerning the large companies quoted on the stock markets and you can also follow the events and news on the markets that could influence the prices of their shares.
• You also have the possibility to trade like a true professional by using the helpful functions available to assist you in your analyses. For example, you can add certain principal trend and volatility indicators to your stock market charts with just a few clicks which will greatly assist you in your historical technical analysis in real time.

But of course, before choosing to invest in the stock markets you should also know and understand the disadvantages of this type of trading.

• Firstly, it is necessary to choose your assets with great care and attention as certain assets on the stock markets are less volatile than others; this makes the detection of trends more complex
• Another point, you should be fully aware that when you invest in the stock markets your capital is not protected. The risks of losses are real and you should take this into account by adopting a good money management strategy to lessen the risk and impact and ensure you do not lose all your capital.

To conclude, although trading on the stock markets offers numerous advantages it is above all best practised by experienced investors that know the markets and are able to spare enough time to complete pertinent analyses.

Advice and analyses for investing in the stock markets

Investing in the stock markets is not an easy thing to do for all investors as it requires a certain knowledge of the markets and an understanding of the most effective analytical methods. This is why exterior advice and information can be so helpful for a beginner trader. In this article we will offer some advice for investing in the stock markets and explain the major analytical methods at your disposal.

The principal analytical methods for investing in the stock markets:

To speculate most effectively in the stock market, you should above all be able to complete comprehensive analyses of the share price you plan to invest in.  Generally speaking, the two types of analyses available to you are the technical analysis and the fundamental analysis. Here as follows are some explanations on this subject.

Firstly, a technical analysis is an analysis of the asset price which is based upon a study of the stock market charts. By studying the historical movements of an asset price it is possible to predict the future movements depending on the markets. Of course, these methods require a certain knowledge of the principal trend indicators and the volatility as well as an understanding of the tools available to use with these charts.  Luckily, the majority of the reputable online brokers offer these stock market charts that can be personalised with visual indicators or time periods and display various information, in real time, that will enable you to complete your analyses. You then simply have to be able to interpret these signals and indicators.

A fundamental analysis however is based on exterior events as well as news and publications that will have an impact on the price of an asset.  This could notably include major events relating to the company that issues these particular shares or news relating to its major competitors or the principal activity sector. These could also relate to financial results or mergers, acquisitions, sales, or partnerships concerning the company.

The best way to predict movements in a share price is therefore to use both a fundamental analysis and a technical analysis. In this way you will obtain more reliable signals that you can use to take strategic positions on your chosen asset.

Some information for your stock market investments:

We shall now continue with some information to assist you in achieving investments on the stock market using these two types of analyses, and some tips we recommend you follow systematically.         

• Firstly, the choice of assets you plan to invest in is primordial as you should favour the shares with significant movements that you also feel comfortable with. The more you know about the company and its sector, the more easily you will be able to analyse it and predict future movements in its share price.
• We also recommend you take the time to learn how to implement your strategies before launching into trading. In this way you will improve your probability of success once you apply your strategy in real time. For this you can use a demonstration account or an online trading simulator.
• It is also important to take the time to implement correct money management. This means that you should pay attention to how you manage your investment capital. In fact, when you invest on the stock markets it can be dangerous to speculate all your capital on a single transaction or use a high leverage effect. The loss of your capital is a real risk that you must take into account.
• Finally, you should also diversify your investments as much as possible to limit your risk level. For this you should implement a covering strategy that will enable you to cover your losses in the case of a faulty prediction.        

By applying these simple rules you will be in a far better position to enjoy success in your experience of stock market trading online.

What are the differences between stock market investing and active trading?

Stock market investing and active trading are two distinct approaches to participating in the financial markets, but they differ widely in terms of strategy, objectives and risk management. Here is an overview of the major differences between these two methods.

1. Long-term vs. short-term objectives :

Stock market investing is generally geared towards long-term objectives. Investors buy stocks, bonds or other financial instruments with the intention of holding them for several years or even decades. Their aim is to benefit from capital appreciation and dividends over time. Active trading, on the other hand, focuses on short-term objectives. Active traders seek to make quick profits by buying and selling securities over very short periods, sometimes even in the same day (day trading). They try to profit from the daily volatility of prices.

2. Fundamental analysis vs. technical analysis :

Stock market investors often base their decisions on fundamental analysis. This involves studying a company's financial statements, growth strategy, profitability and long-term market prospects. Fundamental analysis is used to determine the intrinsic value of a stock and to make informed decisions over long time horizons. Active traders, on the other hand, mainly use technical analysis, which focuses on studying price charts and technical indicators to predict future short-term market movements. They seek to identify trends that can be exploited immediately.

3. Frequency of trading :

Stock market investors trade much less frequently than active traders. They often buy stocks with the intention of holding them for the long term, re-evaluating their portfolio periodically. Active traders, on the other hand, carry out a large number of transactions every day, buying and selling securities according to short-term market movements.

4. Risk and capital management :

Active trading generally involves higher risk due to the speculative nature of the trades and the volatility of short-term markets. Traders must be prepared to accept large and rapid losses. Stock market investors, on the other hand, take a more moderate risk by adopting a long-term strategy, often less influenced by the day-to-day fluctuations of the markets.

5. Time and commitment :

Investing in the stock market often requires less time and involvement on a day-to-day basis. Investors choose their assets and hold them for a long time. Active trading, on the other hand, requires constant monitoring of the markets, regular analysis and real-time management of open positions.

In conclusion, although stock market investing and active trading share the objective of generating profits from the financial markets, they differ profoundly in their strategies, their time horizons and their approach to risk. Long-term investors favour stability and gradual growth, while active traders seek rapid gains in a more volatile and dynamic environment.