Trade12 - Stock Manipulation Through Naked Short Selling

Stock Manipulation through Naked Short Selling

Short selling had been a staple technique for investors who try to hedge against declining markets. It involves borrowing stocks from a broker to sell them at their current price, then buying them back at a lower price. However, there had been cases wherein investors do not actually possess the stocks before shorting them. This technique is called naked short selling, which would be explained in this article.

Trade12 - What is Naked Short Selling

What is naked short selling?

Naked short selling or naked shorting, is the method of short selling a security without borrowing it first from a broker. This method is already banned in most countries, as it results in a failure in delivering the shares paid by buyers. It is also known to have contributed to previous financial crises by forcing stock prices to go down through stock manipulation.

Naked short selling vs. Short selling

The usual short selling method involves borrowing a company’s stock and selling it in speculation that the stock’s value will decline. Once the stock price declines, the short seller buys the same number of stocks at a lower price to cover the original borrowed stocks. The diagram below shows the correct process of short selling.

Trade12 - Naked Short Selling VS Short Selling

On the other hand, naked short selling starts by selling stocks that are neither borrowed, nor ensured the capacity to deliver the stocks being sold. A buyer accepts the trade, but does not receive the stocks agreed upon. When the seller does not obtain the shares within the allotted time frame, it results in what we call a “fail to deliver”. However, the transaction generally remains open until the shares are acquired by the seller or the broker of the seller settles the order. Naked shorting is similar to the process of short selling, minus the part where the broker and short seller interacts.

Effects of naked short selling

Naked short selling can affect the liquidity of the securities involved. If the supply of the security is not readily available for trade, naked shorting could be used. It allows people to participate with the trade without actually possessing the share. There could be an increase in liquidity and demand for an asset with a very limited supply If more investors become interested in the same security.

It is safe to say that naked short selling generally contributes to fake price fluctuations through stock manipulation. It also results to unsettled transactions in the market that causes further problems. This is because both parties need to find a solution to obtain the shares in order to close the trade.

Because of these, numerous countries had banned naked short selling in their markets. It is also believed that the controversial method had contributed to some economic declines in the past years. However, due to various loopholes in trading systems, naked short selling continues to happen despite the strict warning of governing bodies to active investors.

Stay updated on market news, trends, and tips by regularly visiting Trade12. It is a reputable online trading broker that offers tight spreads, flexible margins and high leverage. Read about Trade12 reviews to ensure you trust only the best. Register an account now and enjoy a wonderful trading experience!

Trade12 - The Truth behind Who's Controlling Market Prices

The Truth behind Who’s Controlling Market Prices

As spectators of the market, we see a roller coaster ride of prices all year round. What triggers this phenomenon to happen? Most investors who are asked with this question would probably not know the answer. Who really controls the market prices? Let’s find out as we read this article further.

Who controls the market Prices?

Contrary to what most people believe, the market is not simply controlled or manipulated by large, powerful organizations. There are two entities that actually play the biggest roles in the market – buyers and sellers. Yes, they are composed of seemingly insignificant individual investors, companies, financial managers, etc.

Trade12 - How Do They Control the Market Prices

How do they control the market Prices?

We can compare this scenario to a game of tug of war, with the buyers on one side, and the sellers on the other side. Whoever wins the war would be in control of the market price.

Another way to view this is by looking at the supply and demand. If demand is greater than the supply, then the sellers gain control. On the other hand, if the supply exceeds the demand, then the buyers become in control.

How is it exactly? Here is a realistic scenario:

Both sides have their own goals for their investments. Buyers aim to buy at the lowest price, while sellers aim to sell at the highest price possible. The current price of a stock is determined by looking at the previously traded price. For example, if a stock has been previously traded at $500, then that would be the basis for the next price.

As a buyer, you would want to buy at a price lower than $500. Meanwhile, a seller would want to sell it at a price higher than $500. If the two parties have opposing interests, they would need to make a compromise. Whoever gives in to the other loses, and that’s how market prices are determined. The compromises made on daily trades make up the reason for market price fluctuation.

Read about an in depth guide on how the stock market operates.

Trade12 - The Role of Market Sentiment

The role of market sentiment

Buyers and sellers don’t simply enter and exit the market whenever they want. The reason why trades happen is because of what we call market sentiment. The market is controlled by human beings, who are people who act with sentiment. These sentiments are governed by different factors: market news, natural disasters, economic updates, etc. How the people react to these factors would affect how they would act in the market.

For example, if a certain company declares a huge drop on their earnings report, there is a huge chance that investors would sell their stocks because of fear that the company may not be able to snap back. This would increase supply with fairly less demand, thus resulting in a lower price in the market.

Now that the truth is clear, do not be alarmed whenever you read or hear stories that say the market suddenly rallied or fell. That is not an effect of a powerful entity that plans to control the prices to their likes. It is still on our hands on how the market will strive. Your role is to play with the trend and know how to make every turns go to your advantage.

Stay updated on market news, trends, and tips by regularly visiting Trade12. It is a reputable online trading broker that offers tight spreads, flexible margins and high leverage. Read about Trade12 reviews to ensure you trust only the best. Register an account now and enjoy a wonderful trading experience!

Trade12 - 5 Common Reasons Why Companies Go Public

5 Common Reasons Why Companies Go Public

A lot of privately owned companies go public at some point. But what does it mean to go “public”? What are the reasons why they do it? Is it only to generate money? In this article, we are going to learn about the 5 reasons why companies go public.

Trade12 - The Initial Public Offering

The Initial Public Offering

Companies going “public” undergo an IPO or an Initial Public Offering. An IPO is the first time that the stock of a previously private company is offered to the public for sale. The established shares of the company are listed on an exchange and then sold to public investors. The amount of capital that is raised is usually fixed, and the proceeds may either go directly to the company or to existing shareholders, like the founders or original investors. This process is usually done by companies seeking to generate capital in order to expand or to become traded publicly.

Read more about how the stock market operates.

Trade12 - Common Reasons for Going Public

Common reasons for going public

Generate cash – The most obvious reason for an IPO is to generate cash. A typical IPO may raise an amount of $100 million to $150 million, depending on the quality of the company. There are also some cases wherein an IPO generates up to $5 billion. This money is used by the firm for expansion, creating innovating products, and for making important business-growing acquisitions. There are also times wherein a part or even all the cash go to the existing shareholders.

Increase publicity – Going public can also help with indirectly advertising the company. An IPO means that the company would be listed on public exchanges, which could help in promoting the brand to other people by increasing its exposure. It can also indicate that the company is healthy enough to be included in such exchanges.

Raise market value – If the owners of a publicly traded company decide to sell it at some point, the market value of the company is determined by looking at its traits. A company’s worth is more than just its cash flow and cash holdings. Some other factors include its fund liquidity, all its assets, and whether all of these information is available to the public. Based on statistics, publicly owned companies are valued about 17 times their usual earnings. That is 12 times more than those which are privately owned.

Attract talents – A lot of publicly traded companies use stock and stock options programs in order to attract potential employees. These incentives help companies to entice high-quality personnel and make them competitive employers as well due to the perks in addition to the usual salary offered.

Alternative currency – The stocks of a publicly traded company are easy to convert into its cash value. Because of this, companies may sometimes use them as a form of currency when buying or merging with other companies.

Stay updated on market news, trends, and tips by regularly visiting Trade12. It is a reputable online trading broker that offers tight spreads, flexible margins and high leverage. Read about Trade12 reviews to ensure you trust only the best. Register an account now and enjoy a wonderful trading experience!

Trade12 Review – Differentiating Fixed and Floating Spreads

Differentiating Fixed and Floating Spreads

What are spreads?

In forex trading, spreads is the difference between the bid and the ask price. It represents the service cost of the brokerage or the transaction fees involved in making the order. It is usually denoted in pips or price interest point, which means the fourth decimal place in currency quotation.

Read more about what is forex and you should know about it.

If brokers do not charge commission fees, they usually make money through charging spreads. There are 2 types of spread conditions offered by brokers – floating and fixed spreads. Looking into the type of spread is very important as just a slight change in the spread size can result to a significant difference especially during active trading.

Trade12 - Fixed and Floating Spreads

Fixed Spreads

From the root word fixed, this type of spread does not change regardless of the time or market condition. Although there are some cases wherein the spread charged is adjusted, it only happens during very low or very high liquidity. This change is usually temporary and the spread returns to its general level when the market returns to its normal condition.

The fixed spread may vary across currency pairs, but most major currency pairs range from 2 to 3 pips. It may seem a bit more costly compared to the other type of spread, but fixed spreads make it easier for traders to estimate transactions cost and hedge against market fluctuations.

Floating Spreads

Also called variable spreads, this type of spread is constantly changing depending on the current market condition. During normal or inactive trading times, this spread is usually very low. It may also widen a lot during high volatility market times. Floating spreads fluctuate because of supply, demand, and the total trading activity.

Under normal market conditions, floating spreads may vary between 1 to 4 pips. This may seem very low but it may multiply and widen during volatile market conditions. Floating spreads may have the advantage of lower size compared to fixed spreads. But it is nearly impossible to trade especially during news releases as it can widen too much, thus affecting the possible profits made through the transaction.

Trade12 - Which One is For You

Which one is best for you?

Brokers usually offer both choices to their clients, but choosing which one to take depends on the kind of trading lifestyle you have. For medium to long term investors, floating spreads can be more cost effective because they tend to be lower during normal market conditions. For scalpers and active traders, fixed spreads could be more effective. This is because they can easily trade during news releases without having to pay more. It also ensures that the difference between the bid and ask levels wouldn’t change too drastically. Trading with fixed spreads can prove to be much easier and more predictable than floating spreads.

Stay updated on market news, trends, and tips by regularly visiting Trade12. It is a reputable online trading broker that offers tight spreads, flexible margins and high leverage. Read about Trade12 reviews to ensure you trust only the best. Register an account now and enjoy a wonderful trading experience!

Trade12 - Enhanced Trading Environment with Trade12's MetaTrader 4

Enhanced Trading Environment with Trade12

Keeping it simple on online trading is not the typical case, for it includes an immense amount of cash, time and hard work to be progressive. In any case, Trade12 draws out the most startling and productive trading background as it demonstrates a quick, basic and simple technique in conveying its services. Though it might sound like a platitude, you truly don’t realize what you can accomplish until the point when you make an attempt. With the help of Trade12’s MetaTrader 4, experience speed and the comfort of trading at the tip of your fingers.

Read more about start easy trading with Trade12.

The services of Trade12 don’t end in trading. It has an associate program which offers one of the most noteworthy commission in the forex business. Aside from this, a subsidiary offshoot program is likewise accessible wherein, you can without much of a stretch acquire through the extra commission produced by the new subsidiary. Another fortunate thing about this is you find the opportunity to help your assets while having a considerable measure of associations and connections.

Trade12 gives you a chance to get to your trading account any place you are, whenever you need. It is accessible on PCs, iPhone, iPad, and Android.

ENHANCEMENT

So as to accomplish a consistent trading platform, we invented MetaTrader 4. MetaTrader 4 is the world’s most dependable and innovative platform that gives power and adaptability to dealers around the globe in trading Forex, Metals, Energy, Futures, Stocks, Indices and more on the web.

WHAT ARE THE PERKS OF TRADE12 MT4?

    • User-friendly interface
    • Over 250 instruments to trade
    • Trade Currencies, Energy, Agricultural Commodities, Indices, and Futures.
    • Wide scope of market shares around the globe
    • One click trading ability
    • Extensive pre-packaged specialized indicator
    • Multi-dialect bolster

MT4 KEY FEATURES

    • Trailing stop
    • Wide verity of tools for technical evaluation
    • Import and Export your trading record
    • Robust Security System
    • Live price surveillance of all instruments
    • Multiple advanced charts

With your entrance to Trade12 MT4, you can execute trades in the full utilization of calculations   with least spreads, screen the market situation instantly, open and close positions with accurate timing,  exceptional trading tool resources, and improved reporting capacities.

To partner with Trade12 is something beyond profiting; it is tied in with having stability alongside your contribution in the organization. The more extensive the experience that you get into the organization the better. You simply get significantly more without seeing until the point when you see your account balance.

Trade Forex, Futures, and metals, by means of a desktop or a mobile phone. Experience a quick and secure platform on an easy to use interface.

Utilizing our Mobile Apps for Android, iPhone, and iPad, you can in a split second get to your trading account anyplace, whenever and execute at the snap of a catch. Execute all trading orders live with real-time pricing quotes of every accessible instrument.

Trade12 - Factors Determining Stock Valuation

Factors Determining Stock Valuation

What is stock valuation?

Stock valuation is the method of calculating the theoretical values of stocks. It is the determinant to which investors depend which stocks can be potentially bought (undervalued) or sold (overvalued).

There are several stock valuation methods that you can use to determine the true value of stocks, but we are not going to elaborate on each of them. Instead, we are going to talk about the 4 factors that are commonly useful in determining stock valuation.

Trade12 - 4 Factors that Determine Stock Valuation

4 Factors that determine stock valuation:

Price-to-Book Ratio (P/B) – The price-to-book or P/B ratio represents the value of the company if you ever sell it today. The book value usually consist of all the assets that you can sell along with the whole company which includes the equipment, building, land, bonds, stock holdings, etc.

Price-to-Earnings Ratio (P/E) – The price-to-earnings or P/E ratio is probably the most important determinant of all the ratios. If a stock price suddenly goes up even without a significant change in the company’s earnings, the P/E ratio would decide if it would stay up or not. Therefore, there should always be earnings to back up the stock price in order for it to stay on its current value.

PEG Ratio – Looking at the P/E ratio on its own is not enough to determine the fair value of a stock. It is also important to use the price-to-earnings growth ratio or PEG. The PEG ratio shows the historical growth rate of the company’s earnings. The P/E ratio may indicate where the company is currently at. On the other hand, the PEG ratio will show where the company has been. It also plays a big role in finding the direction to which the company would head next.

Dividend Yield – Most investors go into stocks because of the promises of capital growth, while others prefer making fixed income from dividend stocks. Dividend-paying stocks are sought after because they provide a steady cash flow regardless of the stock’s price. The dividend yield shows how much payout you get relative to the stock you own. You can compute this by dividing the annual dividend by the stock’s price. The dividend yield is usually expressed as a percentage or a ratio. This indicates the interest you get on the money you invest, with more potential growth through the appreciation of the stock’s value.

A company giving out dividends doesn’t automatically mean a healthy company. Looking at the dividend history of a company should show whether it has great potential or not. A company that pays inconsistent dividends through the past years means you cannot count on its dividend yield.

Read more about getting to know fixed income investing.

Trade12 - Bottomline on Stock Valuation

Bottomline

These 4 factors are very important in stock valuation. It is not enough that you focus on just one because that would focus on very narrow choices. Combining the 4 factors may result to a better view of the stock’s worth.

Also, keep in mind that even with thorough analysis; you won’t be able to get the exact value of a stock. What you would get is a range in which lies the possible fair value of the stock.

Stay updated on market news, trends, and tips by regularly visiting Trade12. It is a reputable online trading broker that offers tight spreads, flexible margins and high leverage. Read about Trade12 reviews to ensure you trust only the best. Register an account now and enjoy a wonderful trading experience!