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HD Markets trading Guide The term “Online Trading” refers to the practice of buying and selling stocks, bonds, and other financial assets via the Internet. Stocks, bonds, derivatives, contracts for difference, etc. are all examples of financial securities that can be traded on an exchange or OTC.
Before the advent of electronic trading, investors had to physically place phone calls to brokers or go to exchanges in order to buy and sell shares. With the advent of “The Internet” and innovations such as one-click ordering, discount brokerages, high-speed trading, and algorithms, modern trading has been polished with little effort; and helpful tools and more data are available to retail traders to analyze securities prices.
Stocks are the publicly traded shares of a firm on a stock market such as JSE. When a company goes public through an Initial Public Offering, these shares are issued for the very first time. They go public with a stock market debut and secondary market trading. In intraday trading, buyers and sellers complete their transactions before the end of the trading day, while in delivery trading, investors receive physical possession of the shares they purchase. The equity (equivalent to a share of the company) market is a highly liquid asset class in South Africa.
Bonds are a form of debt issued by a government or a corporation to investors, and they are generally viewed as a safer investment than stock because bondholders are repaid before stockholders. The bonds are traded on the JSE’s Debt Board, the largest and most active bond exchange in Africa. If a corporation needs R100,000,000 to finance an acquisition, it could issue R1,000 bonds on the JSE debt market, with a minimum investment of R10,000 (10 units at R1,000 each). At the bond’s maturity date, the issuer will refund the principal plus accrued interest. When considering total money raised, this is by far the most important market for any nation’s economy. However, not all bonds are created equal; some carry more risk than others. High interest rates are typical for the more dangerous bonds. In general, the interest rate on government bonds is lower than the rate on corporate bonds because of the lower perceived risk associated with them.
Debentures – Like bonds, debentures serve to issue loans, but in this case, money can be collected in the midst of a company’s normal operating cycle. Not only do the rates differ from those of bonds, but there is no collateral backing either. If you’re investing in a company that isn’t financially secure, you should only buy debentures after carefully weighing the debt to equity ratio. These can be bought and sold on the JSE or swapped with other investors.
The South African Financial Exchange (SAFEX),currently a division of JSE, presented the first derivatives product to the market in 1988.
Derivatives follow the price of an underlying asset, such as a stock, bond, currency, commodity, etc. In most cases, the value of a derivative is between 5 and 10% of the value of the underlying asset, and the potential for profit increases accordingly. However, excessive leverage can make them a dangerous tool, and the stress on your accounts can mount quickly. Therefore, it is usually recommended to have the necessary knowledge and experience before trading derivatives. It’s a tool for protecting against or profiting from a drop in the value of underlying assets. On the JSE Derivatives Exchange, you can buy and sell futures, options, quanto F&O, and electronic Contracts for Difference (eCFDs) in commodity, interest rate, currency, and bond markets.
Trading in commodities is one of the world’s first recorded economic activities. Gold, silver, oil, aluminum, etc. are just some of the commodities that have been traded on the international currency markets for decades. Producers can use it to learn what consumers are willing to pay for their goods, and consumers can use it as a resource. Climate and the actual production versus forecasted amount both have significant effects on commodities. As a result, the market is prone to extreme swings in both directions. In order to hedge against the possibility of principal loss or engage in speculative trading, commodities are actively traded on derivatives markets like the JSE SAFEX.
The exchange rate between two countries’ currencies is traded on the Foreign Exchange (Forex or FX) market. The exchange rate between two currencies is determined by a number of economic, geopolitical, and historical factors. It’s the most active market of any asset type, day or night (every day of the year). The health of a country’s economy can be inferred from its currency exchange rate. As a result, it has become a crucial indicator of the health of a country’s policies. Retail traders can engage in foreign exchange (Forex) trading through a contract for difference (CFD) instrument or derivative instrument at CFD brokerages that are authorized by the JSE or the Financial Services and Conduct Authority (FSCA).
Exchange Traded Funds (ETFs) are pools of investor money that buy and sell stocks, bonds, commodities, and key stock market indices. Real Estate Investment Trusts (REITs) are similar but operate differently. The equities of significant companies traded on the JSE may be the sole investment target of an ETF. In contrast, a real estate investment trust (REIT) is a type of managed fund that makes investments in the real estate markets; however, investors can begin to participate in the ownership of such real estate investments by putting in a share of the money. If a piece of real estate is worth $1,000,000, for instance, ten investors each contributing $100,000 would have enough money to acquire 10% of the property.