Stocks

What Are Stocks?

Stocks, also known as equities, represent partial ownership in a publicly traded company. When an individual holds a stock, they essentially own a portion of that company and, depending on the stock class, may be entitled to voting rights and a share of the company’s profits in the form of dividends. Stocks are among the most widely traded financial instruments in the world, valued both for their potential to generate capital growth and their role in portfolio diversification.

Trading Stocks Through CFDs

Traditionally, investors have accessed the stock market by purchasing stocks directly through a broker. While this offers full ownership, it also comes with certain regulatory limitations — such as restrictions on short selling and day trading requirements — which can be restrictive for more active traders.

At Investico, trading in stocks is done exclusively through Contracts for Difference (CFDs). This approach enables traders to speculate on the price movement of a stock without owning the actual asset. CFD trading removes the operational barriers associated with direct ownership and allows for greater flexibility, including the ability to go short and capitalize on falling prices.

Popular Stocks Among Traders

With thousands of publicly listed companies worldwide, stock trading offers an enormous range of opportunities. However, certain companies consistently draw the attention of global traders due to their size, innovation, and market relevance. Tech giants such as Apple, Amazon, Microsoft, and Meta are consistently among the most actively traded stocks. Other frequently traded names include consumer-facing powerhouses like Disney, retail leaders such as Walmart, and dynamic innovators like Tesla.

These companies not only benefit from strong brand recognition but also tend to generate regular news flow, which can drive short-term price movements — a key factor for CFD traders.

Trading Example: Going Long on Apple

Suppose you anticipate that Apple’s stock will rise following the release of a new iPhone model. Before the product launch, Apple is trading at $120. You open a CFD position by buying 10 contracts, each representing 100 stocks — giving you exposure to 1,000 stocks or $120,000 in market value.

With 20:1 leverage, your required margin is just $6,000.

If Apple’s stock price rises to $130, your position gains $10 per stock — delivering a $10,000 return. That’s over 160% on your initial margin. Conversely, if the price drops to $110, you face a $10,000 loss. This example highlights how leverage can enhance both returns and risk.

The Relationship Between Stocks and Indices

Stocks don’t just move in isolation — they also influence broader markets. Stock indices like the S&P 500, Nasdaq 100, and Dow Jones Industrial Average are composed of individual stocks and serve as benchmarks for market performance.

In capitalization-weighted indices, a company’s influence is based on its market capitalization. Larger firms, like Apple or Microsoft, have a greater impact on index performance. The S&P 500 and Nasdaq 100 follow this structure. In contrast, price-weighted indices, such as the Dow Jones Industrial Average, give more weight to higher-priced stocks, regardless of company size.

These relationships mean that significant moves in major stocks can ripple through the indices they belong to, creating further opportunities for traders who follow macro or momentum-based strategies.

Benefits of Trading Stocks with CFDs

One of the key advantages of trading stocks via CFDs is flexibility. Traders can benefit from both rising and falling markets without the constraints of traditional ownership. In addition, the stock market offers an abundance of opportunity — with thousands of companies across sectors, regions, and capitalization levels.

Many stocks also respond well to fundamental analysis, with prices often reflecting a company’s financial health, earnings performance, and industry trends. This behavior can support more predictable trading strategies, especially when combined with technical analysis.

CFDs also allow traders to use margin, gaining exposure to larger positions with a smaller upfront investment.

Risks and Considerations

As with any leveraged product, trading stock CFDs carries significant risk. Leverage can magnify gains, but it also amplifies losses. A small adverse move in the market can have a large impact on capital, making risk management essential.

Another challenge is the level of knowledge required to trade stocks successfully. Equity markets are influenced by a wide range of factors — from earnings reports and macroeconomic data to regulatory changes and geopolitical events. Traders must stay informed and be prepared to react quickly to changing market conditions.