Stocks are shares of ownership in a company. When you buy stocks, you become a shareholder in that company. Publicly traded companies have their stocks listed on stock exchanges like the Hong Kong Stock Exchange (HKEX).
The company’s stock price rises when the company performs well, and shareholders can make a profit on their shares and dividends. If the company performs poorly, its stock price will decrease, and shareholders can lose money.
Stock trading in Hong Kong is very similar to stock trading in other markets like the US or UK. The HKEX is a digital exchange where buyers and sellers trade stocks electronically.
The two main types of stock traders in Hong Kong
There are two main types of stock traders in Hong Kong: institutional and retail investors. Institutional investors are typically large banks or investment firms that trade stocks on behalf of their clients. Retail investors are individual investors who trade stocks for themselves.
How to trade stocks in Hong Kong
If you’re a novice trader and new to the stock market in Hong Kong, there are a few steps you need to take to begin trading.
Choose a stockbroker. The first step to successfully trading stocks is to choose a reliable and reputable stockbroker. There are many brokers out there and not all are operated in the same way, so it’s essential to do your research and select one that suits your needs.
Some factors include fees, commissions, account minimums, and investment options.
Open an account. Once you’ve chosen a broker, you’ll need to open an account with them, usually by completing an application form and providing and verifying personal information, such as your name, address, and date of birth.
You should have your passport and bank statements on hand to complete this step.
Deposit funds. Before you can make a trade, you must fund your trading account, which can be done by bank transfer, cheque, or credit/debit card.
Before depositing a huge amount of capital into your account, some traders like to test the waters by depositing a small amount of money and seeing how efficient a broker’s withdrawal process is, to ensure they can always get their money back if they need it.
Select stocks. Now you’re ready to start selecting stocks to trade. When doing this, a few things to consider include the company’s financial stability, the stock’s price history, trends, and analyst recommendations.
Place an order. Once you’ve selected the stocks you want to trade, it’s time to place an order, which can be done online or over the phone. Your broker will then execute the trade on your behalf.
Monitor your position. It’s essential to monitor your position and make sure that your stock portfolio is diversified, and this means investing in a variety of different stocks to reduce your risk.
What are the benefits of stock trading?
Stock trading can be a great way to make money and allows you to buy and sell stocks quickly, and you can make a lot of money if you choose the right stocks. In addition, it can be an excellent way to diversify your investment portfolio.
What are the risks of stock trading?
Stock trading comes with several risks, including market, liquidity, and credit risks. Traders must understand these risks before they start trading.
Market risk is the specific risk that the value of your stocks will go down. This can happen due to macroeconomic factors, such as a recession, or company-specific factors, such as poor earnings results.
Whenever you’re in a position where you cannot sell your stocks when you want to, it is referred to as liquidity risk. It can happen if there are not enough buyers in the market and the stock is not ‘liquid’ enough.
Credit risk is the risk that the counterparty to your trade will not be able to pay you, which is a particular concern in margin trading, where the broker may owe you money if the value of the stocks falls.
The bottom line
Before opening a position, it is essential to do your research and choose a broker that suits your needs.
Stock trading in Hong Kong is a popular way to invest money, as while there are risks involved, investors can make a lot of money if they choose the right stocks to buy and sell.
Contact a reputable and experienced online broker such as Saxo Capital Markets to start trading; simply go to site for more information.