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Forex Brokers Offering Stock Trading

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The idea of trading stocks is no longer limited to buying stocks using a stock broking account. Thanks to Contracts-for-Difference or CFDs, it is now possible to buy and sell contracts based on the price movements of individual stocks in various stock markets. Despite not owning the individual stocks using this method, the trader gains a lot if the activity is done appropriately.

A stock is a unit of ownership of a company listed on a national or regional stock exchange. Nearly all stocks traded on the platforms of forex brokers offering stock trading are listed on national exchanges. The most popular are the US exchanges (Dow Jones, S&P 500 and Nasdaq 100 indices) and those of the United Kingdom, Japan, Germany, France and Australia. The three US stock exchanges provide the largest depository of stocks traded as CFDs on forex brokers offering stock trading platforms. These stocks cut across companies operating in various sectors, providing the trader with a diverse pool of individual equities to trade.

Stocks are traded in two ways. Firstly, they can be purchased in the primary market through a public offer and eventually traded in the secondary market, or they can be bought and sold in the secondary market directly when the company's shares are listed for trading. The second method is described below, which involves trading the CFD contracts based on the price movements of the individual stocks in question. You can do this on forex platforms that offer the MT4, MT5 and cTrader platforms. On this site, we have taken the pains to curate the best forex brokers offering stock trading, and this article will explain certain aspects of trading stocks as CFDs with these brokers.

Why Stock Trading?

Trading stocks on forex platforms provides another means by which traders can profit from the financial markets, especially if the currency market or other markets are too volatile or too docile to let the trader trade them profitably. Since stocks are in their thousands and constitute the largest asset class by numbers, trading stocks on the platforms of forex brokers offering stock trading is a viable alternative to those traders looking to add a form of diversification to their trading portfolio.

Why should traders consider trading stocks on forex platforms?

A) Stocks are classified into sectors. It is possible to use sectorial news to trade individual stocks profitably. For instance, the rise in crude oil prices experienced during the Libyan war of 2011 and the onset of the Russia-Ukraine conflict in 2022 led to a corresponding increase in the prices of stocks of oil companies such as Shell and BP.

B) Stocks can be traded using correlations. The correlation between crude oil prices, oil company stocks, and commodity prices (gold, copper, etc.) and miners' stocks are examples of correlations that can be used to trade the affected stocks.

C) Stock trading is not a 24-hour market. This makes them amenable to day trading.

How Does Stock Trading on Forex Platforms Work?

Stocks are traded in units of shares. The forex brokers offering stock trading will usually indicate the trade sizes in lots and how many shares are represented by 1 Standard Lot. For UK stocks on leverage of 1:200, 1 Lot = 100 shares.

Stock trading on forex platforms is bi-directional. You can profit from rising prices using long orders or from falling prices using short orders. Buy and sell orders can either be market orders (instructions to purchase or sell at the current price), limit orders (buy/sell at a price cheaper than the market price), or stop orders (buy/sell at higher prices). As mentioned earlier, the stocks made available for trading are listed on national exchanges.

Stock prices have specific fundamental triggers:

  1. Quarterly earnings reports
  2. A takeover, merger/acquisition news
  3. Release of new products
  4. Improved sales numbers (specific sectors such as electric vehicle stocks, tech stocks)
  5. Employment data (NFP)
  6. Expectations of interest rate changes
  7. Specific events affecting a sector (climate-related news, natural or man-made disasters, war situations or acts of terrorism)

Some forex brokers offering stock trading will provide access to news feeds and the latest market reports from resource sites such as Trading Central.

A Typical Trade with a Forex Broker Offering Stock Trading

In the next section, we show an example of a typical stock trade with a forex broker offering stock trading. The assets offered are stock CFDs, allowing the traders to trade contracts that mirror the price changes on the underlying stocks. The minimum trade size is usually 0.1 lots (1 mini-lot). Here are the scenarios.

A) Short Trade Setup

A short position is used to benefit from falling prices. Several situations can produce this: poor earnings, the exit of a successful CEO, failure of a product to deliver to expectations, failed mergers, strike actions by workers, or a significant event that upends an entire sector (e.g. the pandemic-related collapse of oil prices). If you short 1 Standard Lot on a UK stock, you would be trading 1,000 units of that stock. Check the contract specifications of the forex broker to know how many shares are traded when a Standard Lot size is used.

Let us assume that the FTSE100-listed Shell PLC stock is trading at a resistance level of 2360.0. The US decides to free up some of its strategic oil reserves to lower prices at US gas pumps. This leads to a fall in Shell's stock price to 2280.0. Assuming the trader shorted 1 Standard Lot at 2360.0, what would be the outcome of the trade?

  • Entry price is 2360.0
  • Exit price is 2280.0.
  • Trader shorts 1 Standard Lot of SHEL (1,000 shares).
  • A price move of 1.0 (i.e. one point per contract) = $10 for a Standard Lot.
  • The profit on the trade is (2360.0 - 2280.0) X $10 = $800

B) Long Trade Setup

Apple (AAPL) has hit major support at 132.0, testing this level without breaking it for the third time to form a potential double bottom. You decide to wait for a break of the neckline at 152.0 and set up a Buy Stop order at 157.0. The stock eventually rises to 175.0, and you decide to take profit. What was the trade outcome?

  • Entry price: 157.0
  • Exit price: 175.0
  • Trade size: 0.5 lots.

The tick value of a mini-lot-sized trade is $1 for every point. The profit is as follows: (175.0 - 157.0) X 5 = $90

Please note: CFDs on stocks do not expire. Therefore, any stock trade is not subject to expiration and rollover of the position. It will stay open until the trade triggers the Take Profit or Stop Loss price targets. Stock CFDs are also leveraged assets. Leverage with an EU or UK broker is 1:10 and up to 1:500 for offshore brokers. So it will cost $10,000 (EU/UK broker) or $200 to set up a Standard Lot as in the first example, or $5,000 (EU/UK broker) or $100 in the second example.

Forex Brokers Offering Stock Trading: Trader Advantages

Here are the benefits of trading stocks on FX platforms.

  1. Stocks are highly correlated assets. You can use information from other markets to make stock trading decisions.
  2. Stock prices are influenced by a narrower set of market fundamentals than currencies.
  3. Stock CFDs are highly suited to day trading.

Conclusion

Forex brokers offering stock trading present the chance to choose from more than 2,000 stocks listed in different exchanges worldwide. These assets are listed on both onshore (EU, UK, Australia) and offshore (Seychelles, Belize) platforms. Look through the list on this site and open an account to start trading stocks today.