Critical facts for beginning stock traders in the UAE

Critical facts for beginning stock traders in the UAE

If you are new to the world of stock trading, you may feel a little overwhelmed by all the information. It is important to remember that starting with trading stocks can be tricky, but it’s not impossible. Here are the key facts that will help you get started as a stock trader in the UAE.

What stocks are available to trade in the UAE, and how do you trade them?

The first step to trading stocks is understanding what stocks are available to trade. The most popular stock exchanges in the UAE are the Dubai Financial Market (DFM) and the Abu Dhabi Securities Exchange (ADX). Both of these exchanges offer a variety of stocks from different companies across many different sectors. 

When you’re ready to start trading stocks, you will need to open a brokerage account with a registered broker. Once you have funded your account, you can begin buying and selling shares. It is important to note that you cannot buy or sell shares directly on the DFM or ADX; you must go through a broker.

The different types of stocks that are available are:

Shared stocks: Common stocks are the most commonly traded type of stock and represent ownership in a company. When you purchase shares of common stock, you buy a piece of that company and become a shareholder.

Preferred stocks: Preferred stocks are a type of stock that gives holders priority over common shareholders regarding dividends and assets in the event of liquidation. However, preferred shareholders do not have voting rights.

Bond funds: Bond funds are investment vehicles that invest in bonds, which are debt instruments. When you invest in a bond fund, you essentially lend money to the bonds’ entities, such as corporations or governments.

Index funds: Index funds track specific stock indices, such as the S&P 500. When you invest in an index fund, you invest in all the companies that make up that index.

What is a ticker symbol, and how do I find one?

A ticker symbol is a short code representing particular security listed on a stock exchange. Ticker symbols are typically four or five letters long. For example, the ticker symbol for Apple Inc. is AAPL, and the ticker symbol for Google Inc. is GOOG. 

You can find ticker symbols for stocks by searching for them on a financial website or asking your broker.

What is a bid and ask price?

The bid price is the highest cost a buyer is willing to pay for a security, and the asking price is the lowest price a seller is willing to accept. The difference between the bid and ask price is called the bid-ask spread. 

When buying or selling shares, you need to be aware of the bid and ask prices. The bid price is what you will pay if you buy shares, and the ask cost is what you will receive if you sell shares. It is important to note that the bid-ask spread can vary depending on the stock exchange and the time of day.

What are the benefits of trading stocks?

There are many benefits, including: 

The ability to make money: When you buy shares of a stock, you hope that the price will go up so that you can sell the shares for a profit.

Diversification: When you invest in stocks, you diversify your investment portfolio. It is because stocks are not correlated with other asset classes, such as bonds or real estate.

The potential to earn dividends: Some companies that issue stocks also offer dividends. Dividends are payments made by a company to its shareholders, typically paid out quarterly.

The potential to make capital gains: Capital gains occur when you sell a security for more than you paid. If you purchased shares of a stock for $50 and sold them later for $60, your capital gain would be $10.

The ability to vote: As a shareholder, you have the right to vote on certain corporate decisions, such as the election of directors.

How to open a brokerage account and place your first order

To buy or sell shares, you must open a brokerage account. It’s an account used to hold securities, such as stocks. 

To open a brokerage account, you must provide personal information, such as your name, address and Social Security number. You will also need to deposit capital into the account. Once you have opened a brokerage account, you can place an order to buy or sell shares.