People have varying reasons for joining the stock market. Some people want to diversify their portfolio, some trade stocks as a day job or source of passive income, and other people want to make quick profits from stock market speculation.
Although stock market investment seems complicated, it is easy to join and start trading. In fact, it's the most recommendable initial investment for beginners.
The biggest hurdle for aspiring stock traders is they don't know where to start. If you are a beginner who wants to invest in the stock market, you've come to the right place!
Here is a guide to help you kickstart your new trading journey.
Stock trading follows a simple set of steps.
Research well-performing stocks
Decide whether you want to invest for the short term or the long term
Set up your trading strategy
Learn to place trades and interpret charts
Choose a broker and begin
That seems pretty straightforward, doesn't it? But there are fine details for every step you take. You must pay attention, learn, and follow the substeps to become a successful investor. Luckily, Mitrade has created this short guide to help you begin your stock investment career!
There are two trading approaches in stock trading: long-term and short-term. The choice depends on your investment goals.
Short-Term (Small, Quick Gains)
Short-term investing in stocks means holding a buy or sell stock position for several days or weeks. An example is day trading where you trade stocks within the open and close of the day. Day trading follows the principle of small, quick gains.
In short-term trading, you need to be familiar with technical analysis and strategies to execute successful trades. A popular short-term investment option for traders is stock CFDs. More on that later.
Long-Term (Value Investment, Slow Gains)
Long-term investing involves buying stocks that you think will perform well in the next five to ten years. It relies on the idea that the longer you hold an asset, the higher the gains.
The stock market is volatile, and economic or financial factors may affect the performance of investment assets. That means, there is a possibility of experiencing losses in the over five years you let money lie in the stock market. However, you could gain massive profits within the same period.
As a beginner investor, it is imperative that you understand the difference between investing in stocks and trading stock CFDs:
Buy Stocks to invest
Stock investment involves investing in the shares of a particular company, such as Jollibee Foods Corporation (JFC). Essentially, owning shares means owning a part of the company.
When you buy stocks from a company on an exchange, you need to pay the total price of each share. Your gains will depend on how much the share’s price grows over a certain period, which is directly related to the company's growth.
Stock CFDs Trading
Stock CFDs trading is quite different. Traders invest in the underlying stock price movement without owning it. Essentially, you speculate on the asset’s market price and earn profit from it.
Contract for Difference (CFD) is a contract that lets investors profit from an asset’s price movement over the short term without owning it. The contract's value only considers the price change between the entry and exit of the trade and not the asset's actual value.
Stock CFD is leveraged. For example,
If your broker offers a 1:10 leverage, you only need to pay PHP1,000 to trade PHP10,000. While leverage can boost profits, it also means higher risks.
Always remember that you could lose more than your initial capital when trading with leverage.
There are two popular ways of investing in US stocks: buying the stocks at an international stocks broker and trading CFDs.
Popular stockbrokers that accept the Philippines include Mitrade, Tiger Brokers, IBKR, TD, and Ameritrade. You only need to open an account online, deposit funds, and speculate well to go.
The simpler way to invest in the US stock market in the Philippines is to trade US stock CFDs.
Investing in US stocks CFD gives you access to a wider market. US stock CFDs trading enables you to capitalize on the price movement of major US shares, regardless of whether the value goes up or down. And with access to pre-and post-market pricing, you can easily seize all trading opportunities.
In fact, trading US stock CFDs offer other numerous benefits, such as low deposits and high leverage.
Now that you know what stock and stock CFDs are and how to invest in them, let's get cracking! We've created short step-by-step processes to help you begin trading in both markets.
If you opt to buy stock for the long-term, simply follow this short guide:
Step1: Choose a Stock Broker
There are two options for investing in the Philippine stock market: Online brokers and Traditional stock companies. In this article, we'll discuss COL Financial.
In the Philippines, one of, if not the most popular online broker is COL Financial. The brokers boast a beginner-friendly and easy-to-navigate platform. In addition, you can open an account and begin investing in stocks for as low as PHP1,000.
Most beginners begin stock trading with COL Financial. Some beginner stocks that most Filipinos invest in are Jollibee Food Corp. (JFC) and Ayala Corp. (AC).
Step2: Open and Fund Your Account
COL Financial offers a beginner account called COL STARTER that requires a low deposit of PHP1,000. This account has similar features to its two more advanced accounts in some aspects such as research and support.
Step3: Place an Order
Browse through the offered stocks and determine which one/s you want to invest in. Decide whether to buy or sell.
Step4: Keep track of your investments
Keep track of your investments daily, to know whether you’re profiting or losing money. The market changes daily, and so does the value of your investments. In the meantime, read widely about stock trading to gain more trading knowledge.
Fees and taxes are automatically charged every time you place or execute an order. It helps to know which fees you are paying.
Some of the automatically charged trading fees are Value-added tax (VAT) on commission at 12%; PSE Trans Fee at 0.005% of the Gross Trade Amount; and a Clearing Fee at 0.01% of the transaction amount.
In addition, selling a stock also costs you the Stock Transaction or Sales Tax, at 0.6% of the transaction amount in 2022. Note that all these fees vary depending on your broker's fee structure.
Stock trading is profitable when you do it right. There are two main ways that you can earn out of your stock investments.
Capital appreciation is the increase in the price of the stock. For instance, if you buy a stock at PHP300 per share and the market value rises to PHP400 after a week, your capital appreciation is PHP100. You only realized that profit once you sell the share at PHP400. However, if you decided to hold onto the trade and the stock's value falls to PHP250, then your loss is PHP50.
Dividends are profits that corporations distribute to their shareholders. This happens when a corporation has profits or surplus gains, and they pay shareholders a proportion of this profit either through cash or additional shares. Usually, dividends are paid out once a year, but some corporations do it quarterly.
If you decided to invest in stock CFDs instead, below are the steps you need to follow.
For this part, we'll be discussing trading stock CFDs on MiTrade.
Step1: Place an Order: Go Long (Buy) or Go Short (Sell)
tock CFD prices are always labeled as sell/buy, and the difference between the two is called the spread.
Step2: Set Stop Loss and Take Profit
Stop loss and take profit levels help you minimize losses and lock in gains, respectively.
A stop-loss automatically closes a trade when it hits a particular level on the losing side, which you can set several points from the current market price. A take profit closes the trade when the price hits the targeted profit level.
Step3: Close the Trade
Once you have secured enough gains and would like to prevent potential losses, then it's time to close the trade. (*Note that you can manually close the trade before the set stop loss and take profit levels are hit).
Choose Your favorite Markets to Trade Now!
Stock CFDs trading is an excellent way to gain big profits in a short period because you trade on leverage. In addition, you gain profits from trading stock CFDs whether you buy (go long) or sell (go short).
Let’s say you want to invest in NAS100 stock CFDs. The share price for each NAS 100 is 5000 USD and you want to invest twenty shares. Your broker offers a 1:20 leverage, which means you’ll only need 5,000 USD to trade a 100,000 USD position.
While that may seem like a big opportunity to trade, remember that your gains or losses are calculated on the total 100,000 USD position, and not your 5,000 USD capital, called the margin.
$5,000 = ($5,000 x 20) ÷ (20 ÷1)
margin = (share price x quantity) ÷ (leverage)
Now, if you think the price will increase, then you buy or go long, and if you think it will fall, you sell or go short.
If you bought 10 NAS 100 with the long price at 5000 and it rose to 5010, with each NAS 100 contract equal to 10 USD per point (pip), a ten-pip upward movement means you gained 2000 USD. It follows the same principle as selling.
See the calculation below:
Buy (Go Long)
$1000 = (10 x 10) x (5010 - 5000)
Profit = (quantity x price per pip) x (current price - price when bought)
If you decided to sell or go short when the value of NAS 100 was at 5000, and then it rose to 5010, your loss would be computed as:
Sell (Go Short)
Loss = (quantity x price per pip) x (price when bought - current price)
$ -1000 = (10 x 10) x (5000 - 5010)
These computations should elaborate on how leverage can be both an advantage and disadvantage in CFDs trading.
While it is very enticing to trade a large amount of money and just shelve out a smaller portion of that from your wallet, your losses could also be so much higher than you initially invested.
Reading stock charts requires familiarity with technical analysis and the different types of candlestick charts: bars, lines, and candlesticks. If you're a beginner, read this article to learn more: A Comprehensive Guide On Using Candlestick Chart Patterns.
The ticker symbol of a stock is displayed on a chart, alongside its price movements over the last minute, hour, day, week, month, or year.
There is an option to change the date interval on the display chart, which many traders refer to when using technical analysis, or when they use trading indicators to determine the future price movements of an asset.
The price movement or performance of a particular asset is plotted in graphs so traders can visualize its upward and downward movements over time.
The line graph and the bar chart are two chart constructions that show the underlying asset’s movement.
Meanwhile, the candlestick chart provides greater detail, as shown in an example of NAS100 price movement on MiTrade below:
You can switch between the candle, line, and graph display by clicking the icon on the top left of the chart.
On this graph, you can see that the time interval is set to every 15 minutes. The graph also shows a significant decline between 16:00 and 2:00 hours. That means that during these hours, NAS100 was on a downtrend.
At the beginning of the 2:00 hour, the movement aims to go upward and establish an uptrend. Whether it's a success or a failure will show in the future price movements of the asset.
Investing in the stock market in the Philippines shouldn’t be intimidating for a beginner investor. You just need basic education about stock trading, enough funds, and dedication to begin your investing journey.
But remember that stock trading can be a long, hard gain. It could take months to years before you see a sizable increase in your investment, especially if you started small.
On the other hand, if you want to trade in leverage and higher chances of sizable profit, then stock CFDs might be better for you.
You could immediately double your investment in just a few days. However, that also means the risks are just as high as the gains.
● Never invest money you cannot afford to lose
Stock trading is a volatile market, and there is a huge possibility of making profits as there are losses. The PHP 20,000 you invested today could turn into PHP 40,000 or PHP 0 in weeks or months. So, don’t put your hard-earned money into stocks, just invest what little money you can afford to lose. Then, build your investments from that.
● Always diversify your portfolio
Never invest in just one stock since that could lose you all your money faster than if you diversified your investment into multiple stocks.
● Always set a stop loss
People who do not use stop losses always learn the hard way after losing a couple of hundred pesos. But why wait for that when you can do that now?
● Choose a good and reliable broker
Always choose brokers that are regulated by international regulators. How much you gain from your investment won't matter if you are trading with an unreliable broker.
At MiTrade, you can invest in US stock at very competitive prices or begin your investment journey in the Philippines stock market. Enjoy low fees, transparent spreads, and commission-free trading from a regulated broker today!
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What Does Mitrade Platform Include?
300+ global markets
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0 commission, low spreads
take profit, stop loss for every trade
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Q: How much is the minimum investment in the stock market in the Philippines?
You can trade with as low as PHP1,000 with most brokers, including COL Financial.
Q: What is the market time for stock trading in the Philippines?
The trading hours in the Philippines are from Monday 9:30 am to Friday at 12:45 pm (GMT+08:00).
Q: How can I buy Google and Apple stocks in the Philippines?
You can invest in US stocks from the Philippines with brokers that provide access to US shares, such as MiTrade.
* The content presented above, whether from a third party or not, is considered as general advice only. This article should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. *CFD trading carries a high level of risk and is not suitable for all investors. Please read the PDS before choosing to start trading.
Risk Warning: Trading may result in the loss of your entire capital. Trading OTC derivatives may not be suitable for everyone. Please consider our legal disclosure documents before using our services and ensure that you understand the risks involved. You do not own or have any interest in the underlying assets.