How to Buy and Trade Amazon Stock
When you want to order something, what's the first company that comes to mind? There's a high chance that it's Amazon. In a time when the borders are closed and people are isolated at home worldwide, Amazon keeps working.
Amazon: A Short History
Amazon is a multinational technology company that operates around the world. It's headquartered in Seattle, Washington, and was founded in 1994 by Jeff Bezos. Since that time, it has managed to expand to such sectors as e-commerce, cloud computing, digital streaming and artificial intelligence. Although it didn't previously exist as a multinational corporation, it keeps up with giants like Google, Microsoft and Apple.
Is It Worth Investing in Amazon Stock?
In 2019, the company gained the title of the world's largest e-commerce retailer by online revenue. The same year, the company became the second-largest employer in the US after a series of acquisitions such as that of Whole Foods. Amazon provides plenty of products, including Amazon.com, Amazon Web Services, Prime Video, Amazon Music, Fire Tablets, Fire TV, Echo, Alexa and Kindle e-readers and books.
In addition to last year's rewards, Amazon managed to stay afloat amid the coronavirus crisis. Looking at the chart, you'll see that AMZN stock plunged from mid-February to mid-March, the initial outbreak of the COVID-19 pandemic. Nevertheless, in the middle of March, the stock rebounded and moved up, reaching new highs. Currently, the company has been trading at levels never seen before.
How to Buy Amazon Stock
There are two primary ways to invest in Amazon: real shares and CFD trading.
Real Shares
Amazon stock is traded on the Nasdaq stock exchange under the ticker AMZN. If you want to become a holder of Amazon shares, you can work through a brokerage firm or a financial advisor.
When buying shares via a broker, you need to find a reliable firm, open an account, search for Amazon stock in the list of available assets, decide how much money to invest and place an order.
There are two types of orders you can place: market and limit orders. Placing a market order means you can buy shares at the current market price. A limit order lets you set the maximum price at which you're ready to buy the stock. If the price per share exceeds your limit, your order will be cancelled with no loss.
The one thing you should consider when purchasing real shares is the high price.
There's also the option of fractional share investing, which means you can buy a fraction of the shares and increase your holdings over time.
A financial advisor can also help you buy stock. When trading through a brokerage firm, you're responsible for all your decisions and can get advice only from experts online. That may be challenging for a newbie trader. A private financial advisor can help you with your investment decisions. Although the risks are still on you, an advisor can assist you with what to invest in and when.
If you're not sure how to structure a portfolio or what stocks to trade, an advisor is a good option for you.
The third way is to buy shares directly from the company without assistance. You can open an account with Computershare and do financial operations. For more details, visit Amazon's website.
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Benefits |
Limitations |
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Investment in the future. Although stocks are a risky asset, if you buy shares of such stable companies like Amazon and keep them for an extended period of time, you have a chance to receive a great reward in the future. But you should remember that the company doesn't pay dividends. You can benefit only if its stock price continues to rise. |
Delayed rewards. No matter what stocks you trade, you may have to hold them for three to five years to see meaningful gains. As you can see, the value of Amazon changes from day to day. That means if you decide to sell your stock as soon as you see a small decline in the price, it may lead to lost opportunities. It's unlikely you'll want to sell stock and see it rise again after a rebound. |
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Professionalism. If you decide to purchase real shares, you can improve your skills as investing in stock requires complex analysis and persuasive skills. |
Complicated analysis. Opening an account and placing an order to buy new shares isn't enough. You should analyse the industry, the company's internal and external factors, economic data, previous market movements, and apply technical indicators to determine the price. |
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Lower risks. As we said above, by purchasing real stocks, you're making a long-term investment. The market volatility is visible in small timeframes but smoothed out over the long term. Moreover, Amazon is one of the blue-chip companies that proves its reliability even in times of crisis. |
Big funds. To purchase the company's shares, you'll need to have a significant amount of money. That's why there's the option of fractional share investing. |
CFDs
A contract for difference, or CFD, is an option to trade shares without materially owning them but merely speculating on the price difference. CFDs won't allow you to buy shares; all you can do is trade on price movements. Are you familiar with forex? If you are, you can quickly start trading stock CFDs.
CFD trading is done through a brokerage firm, as well. Again, there are only a few steps to start trading CFDs. Find a trustworthy broker, open an account, choose AMZN stock and place an order.
The main advantage of CFD trading is a win-win strategy. You can both buy and sell shares, even if you don't own them.
The main advantage of CFD trading is that you can gain rewards, not only by buying shares but by selling them even if you don't own them. If you see a stock is declining, you can wait until they meet a bottom and buy on the rebound. On the contrary, if you notice that a stock is overbought and is trading at significant highs, you can wait until they correct downward and sell.
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Benefits |
Limitations |
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Fast rewards. Unlike holding real shares, trading CFDs allows you to receive potential profits within one day. |
High risks. If we compare real stocks and CFDs, CFD trading is riskier because it's unlikely you'll hold a position for many years. The idea of CFD trading is to catch market sentiment, trade within a maximum of several months, and then take profit. The volatility is enormous if you trade on small timeframes, but it doesn't matter in Amazon's case because it's a fairly stable stock at the moment. |
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With the ability to trade in all market conditions, you win both ways. Trading is based on the option to place both buy and sell orders. You don't have to wait for a perfect opportunity when the shares fall to buy them. You can open a trading platform and start trading immediately. |
Short-term investment. You can consider it as either an advantage or a limitation, depending on your aims. If you plan to invest in your future, CFD trading won't provide you with such an option. |
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Low funds. You don't need lots of money to place your first order and trade Amazon stock. Moreover, a reliable broker can offer you leverage that will increase your funds. |
Amazon Stock: Analyse and Forecast
To predict the movement of Amazon shares, you don't need exceptional tools. If you're familiar with technical and fundamental analysis, you won't have difficulties. However, it's worth considering what factors are more critical for AMZN shares.
If you're familiar with technical and fundamental analysis, you won't have difficulties predicting the stock price.
Fundamental Analysis
We'll start with fundamental analysis, which determines whether stocks are overbought or oversold:
- Earnings report. It's a crucial part of the analysis of any stock. Earnings figures are released quarterly to show the company's performance. On 25 October 2019, Amazon shares opened with a huge gap down after the Q3 earnings report dropped a day before.
- Industry news. Amazon has one of the largest stocks in the tech industry. It means that significant events in the industry will affect the company's performance.
- Management. To be sure the company's value hasn't changed, it's vital to know about its internal issues. Hiring and firing and mergers and acquisitions will affect the company's stability. To stay up-to-date, you can read news about the company.
Technical Analysis
To use technical analysis while predicting Amazon stock's market moves, we recommend using Fibonacci retracement, the Awesome Oscillator or Volume.
Technical analysis requires lots of practice. Before you enter a real market and start spending your cash, it's worth practising in a demo account. Libertex offers a demo account on its modern trading platform with all-new indicators that will make your analysis more accurate.
How to Reduce Risk Trading Amazon Stock
Although Amazon stock is one of the most stable in the market, you should be ready for unpredictable events that may affect it.
Diversify
Amazon belongs to the tech industry. That means you should put your funds in the stocks of another sector in case the market moves against you. It's also essential to keep some funds in reserve. Suppose the market moves in the opposite direction to your prediction. If it does, you should always have the opportunity to open another trade to return money or to invest in a better option.
Hedge through diversification. Choose stocks from different industries and split your funds.
Choose a Trustworthy Broker
It's crucial to find a broker who will offer fair commissions, reasonable rates and attractive rewards. At the same time, the broker should provide a convenient trading platform with plenty of technical indicators and settings. Take a look at platforms with a demo account to see all the tools you need to build a comprehensive analysis.
Analyse Like a Professional
It's essential to make your own predictions and not rely on others' forecasts. Above, we mentioned the factors of fundamental analysis you should consider when predicting the price of Amazon stock.
Risk Management
Before you put your funds in either real shares or CFDs, you should analyse how much money you have, how much you should invest and how much potential profit or loss you'll make.
Purchasing real shares requires bigger funds than CFD trading does. Nevertheless, you shouldn't risk more than 1-2% of your deposit amount. Keep money in case the market moves in the opposite direction or to catch a better opportunity.
Conclusion
To sum up, Amazon stock is one of the most attractive investments among professional investors. For 25 years, the company has proven its reliability. The company's stock rises in value daily and confirms its attractiveness as an investment. Moreover, Amazon stock provides exciting opportunities for CFD trading.
However, before you enter the real stock market, you should practice your skills. Libertex offers a free, zero-risk demo account that gives you a chance to master your predictions at no cost. Open a demo account and start your big investment journey.
Let's cover the basics of Amazon stock again.
FAQ
Does Amazon Pay Stock Dividends?
Although Amazon has existed for 25 years, the company believes it shouldn't pay dividends. Amazon investors can profit from the company's continued growth and development.
Does Amazon Have a Direct Stock Purchase Plan?
Yes. In August 2019, the corporation launched a Direct Stock Purchase Plan. You can open an account with Computershare and buy, sell or hold Amazon stock.
How to Buy Amazon Stock
If you want to buy real shares, you can do that either via a brokerage firm, a financial adviser or directly from the company.
Disclaimer: The information in this article is not intended to be and does not constitute investment advice or any other form of advice or recommendation of any sort offered or endorsed by Libertex. Past performance does not guarantee future results.
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