CFDs, Politics and Share Prices

Politics and Share Prices

Political factors also play a part in stock prices since the environment in which businesses operate is molded by the government. Politics have a direct effect on international relations, regulations, monetary and fiscal policies, lawmaking, taxation, and many other aspects of the economy.

This, in turn, may influence the ability of a company to do business, the price of base materials, the marketing and distribution process, and many others. All of these factors may have a strong influence on the performance of a company.

For example, the sanctions imposed on Russia by the US and European countries, in light of Russia’s invasion of Ukraine in February 2022, affected many companies’ shares. The British energy company, BP, for instance, dropped substantially due to its sanctions on Russian energy company, Rosneft.

Therefore, the effects of geopolitical tensions can immensely affect the prices of shares.

How Are Share Prices Analyzed?

If you are interested in better understanding the pricing of the shares you choose to trade, you can use technical and fundamental analysis to do so. While you cannot guarantee that your analysis of prices will be precise, you may be able to use the analysis to choose your next trade.

Technical analysis uses past price movements and repetitive patterns in order to forecast future price patterns. While recurrent past prices can often act as a decent indicator for future movements, traders should, however, keep in mind that the market is very volatile and that past results are no indicator of future performance.

Fundamental analysis looks at a company's financials and external factors in detail and is often used to determine the value of a stock and gauge price movements, such as return on equity (ROE), price-earnings ratio (P/E), and relative dividend yield.

How Are Share Prices Analyzed?

Investing in the stock market can be challenging, but rewarding if you know what to do. There are some basic parameters you need to follow to avoid making detrimental decisions. Below are just a few steps that any trader should take before trading stocks. In order to minimize poor trading decisions and be more prepared and educated when it comes to the stock market.

Research the Product

One of the most important aspects when trading stocks, whether you are trading stocks CFDs or trading the underlying asset on the stock market, is to make sure you have done your homework. Some platforms offer economic calendars, trading platform indicators, and charting, which can all be used as aiding tools.

All of these tools are provided on the FXTRADING platform, where we offer trading on stock CFDs. You should also try to keep up to date with the latest news and trends before making any trading decisions through FXTRADING’s free News and Market Insights articles.

Market sentiment can shift quickly, and being able to act on this shift takes perception and intuition. These skills can be developed by keeping up to date with current events and understanding how they impact markets.

Different Order Types

Knowing the different order types is a crucial, and fundamental part of the trading process. For example, when trading CFDs on the FXTRADING platform, there are various types of trading orders that can be placed, including market orders, future orders (pending orders) and stop orders.

• When a trade is executed at “market order", it is executed at the current market price.

• You can also request to open a position when the instrument reaches a certain price, specified by you, which is known as future orders (pending orders).

You can choose to close your positions manually, or set stops so that the system will close them automatically with stop orders.
If you set a limit stop (close at profit), your trade will close at the rate you specified, in order to help you lock profits.
You can also set a stop loss (close at loss), in which you specify a closing rate, aiming to avoid further losses.

Once the selected rate is reached or passed (as sometimes the price can ‘gap’ and move past the designated level), the stop will be triggered and the position will be automatically closed at the first available price.
There is no guarantee a position with a set “close at loss” will close at the exact price level specified, due to slippage.

The limit stop and the stop loss features are risk management tools that aim to lock your profit or limit your losses, and these are available for free on FXTRADING’s platform.

A guaranteed stop order, on the other hand, guarantees the position will close at the exact selected rate, even if the market price varies. On the FXTRADING platform, this feature is available for some instruments, and a fee is charged to place this order.

Diversify Your Portfolio

By diversifying your portfolio, you include a wide range of assets and stocks instead of sticking only to one or two types. Diversification allows you to get more access to the market and minimize your losses since you don’t put all your capital into one place.

You can diversify your portfolio in two ways: across asset classes and within asset classes.
In the former, you spread your investments across multiple types of assets. For example, rather than only trading stocks CFDs, you might also diversify your portfolio by trading Cryptocurrency CFDs, Commodity CFDs, and Index CFDs.

However, when you choose to diversify within an asset class, you spread your capital across a variety of investments within that class. Instead of buying stock CFDs in just one company, you would buy stock CFDs in many companies of different sizes and sectors.

Therefore, you should consider which type of diversification is meant for you and keep an open mind when it comes to your portfolio.