Tesla Stock: Should You Buy and Trade?

Tesla is a company famous for its outstanding high-tech products. When people hear Tesla, they think about something modern and futuristic. At the same time, Tesla is also well-known for the provocative statements of its founder and CEO, Elon Musk.

The company's stock is an excellent investment you should consider. Why? Keep reading to learn Tesla's secrets.

Tesla Motors: How It Started

Tesla Inc. was founded by Marc Tarpenning and Martin Eberhard in 2003 as Tesla Motors. The main idea was to produce electric sports cars. Lots of Tesla investors evaluated the company's approach and put their money in it.

One of them was Elon Musk, who invested more than $30 million. He became Tesla's chairman in 2004 and, by 2009, when both founders had left the company, Musk became its CEO.

In 2008, the company created a Roadster sedan. It was the first car that was fully electric and could compete with petrol cars. For years, the company had been developing cars.

In 2012, it launched fast-charging facilities for Tesla users. As the company started focusing on more than just cars, it was renamed Tesla Inc. in 2017. In 2018, the company entered the solar energy market.

Is Tesla a Reliable Investment?

Tesla joined the stock market in 2010. Since 29 June 2010, it's been listed on the Nasdaq Stock Exchange under the ticker TSLA. Tesla Motors became the first US car manufacturer to enter the stock market since 1956 when Ford Motor Company went public.

Usually, car producers' stocks are stable. If we look at a chart of Tesla's stock, however, we'll see that they're highly volatile. The company's stock strongly depends on the quarterly earnings reports, Musk's announcements and product releases.

a chart of Tesla shares

We all know that Twitter is a place of provocative news, tweets and information that increase market fluctuations. In 2018, the company's stocks skyrocketed, and the Nasdaq had to halt trading for them after Elon Musk tweeted about his willingness to take Tesla private at $420 per share. The most paradoxical thing is that the information wasn't confirmed but was released as a tweet.

On 1 May 2020, the stock plunged after Musk tweeted that he thought the share price was too high. The stock lost nearly 12% in value within 30 minutes.

Elon Musk is a famous Twitter lover, so if you want to succeed in trading Tesla shares, follow his Twitter account.

With that in mind, Tesla stock is an excellent option for traders and investors who feel comfortable in highly volatile markets. At the same time, the shares aren't expensive; the highest price they've reached was just above $1000.

How to Start Investing in Tesla

There are two ways to invest in Tesla stock: either by trading it or buying it via a broker.

Buy Tesla Stock

Many companies have a direct stock purchase programme, meaning you can buy their stocks directly from them without a broker. Tesla, however, doesn't provide such an option. That's why you should find a reliable broker that will help you purchase shares.

To buy Tesla shares, find a reliable broker.

A broker is used to open an account, deposit money and make trades. A trustworthy brokerage firm should charge low fees, provide a modern and convenient platform and offer strong signals that help you make the right decisions.

After you find a reliable stockbroker, you'll need to follow several steps to become a shareholder of Tesla Inc.:

Open an account and deposit funds.
To avoid losses, be sure how much money you're going to invest. Whether you're an investor or trader, you should know the rules of money management. There are different useful risk/reward ratios, but the best ones are 1:2 and 1:3. It means your expected profit should exceed the possible risk by at least two or three times.
Choose the timeframe for your investment and the number of shares. The timeframe will determine for how long you're ready to invest, while the number of shares will directly depend on the amount of money you have.
The last step is making the purchase.

Purchasing stock is a more or less easy process, but it has both advantages and disadvantages.

Benefits	Drawbacks
Owner of real shares. For some people, it's important to own the stock of a big international company.	Delayed profit. Investing intends to reap long-term rewards. So, if you need money immediately, investing is not for you. You can sell stocks whenever you want, but there's the risk that you'll either get low rewards or even lose money.
Secure your future. When you purchase real stocks, you're investing in your future. First, investors buy shares for an extended period. Secondly, long-term investments have lower risks over time. So, investors hedge their funds by investing in stocks.	Lower profit. The profit from investing in stock directly depends on the number of shares you own. If you don't have a lot of funds, you're unlikely to earn a lot. Moreover, as investing provides lower risks than trading, the profit you're likely to make also goes down.
Lower risks. As we've mentioned, if you invest in stocks for an extended period of time, your risks decline.	Professional analysis. Though you deal with stocks while investing and trading, the analysis for stock investing is more complicated because there's no chance to buy shares at previous prices. You need to identify the perfect stocks for long-term investments and the best entry point.
	Only buy. If we compare investing and trading, when you invest, you can't sell stocks until you own them. If you trade, you can both buy and sell without owning them.

Tesla Inc. doesn't pay a dividend to its investors and doesn't plan to do so anytime soon. So, any profit you make will be based entirely on whether the stocks' value rises.

Trading Tesla

CFD stands for contracts for difference. They're an alternative to trading stocks themselves; with CFDs, you don't own the stock and profit (or lose) based on the price difference. CFD trading has a lower barrier to entry than investing.

To trade stock CFDs, you also need to apply to a reliable broker and open an account. An outstanding advantage of a CFD broker is that it allows you to trade in a demo account. Libertex, for example, has a demo account that fully duplicates the real one but allows you to trade with simulated money to learn how the market moves or to test a strategy. You won't get real money as profit, but you'll be able to practise trading.

As soon as you test out trading Tesla stock in the demo account, you can open a real account and deposit funds. Remember the money management principles we mentioned above. CFD brokers provide leverage, so you don't need significant funds to trade stocks.

CFD trading has a lower barrier to entry than investing.

In the end, choose a timeframe, analyse market conditions for Tesla stock and place an order.

Let's consider the pros and cons of CFD trading.

Benefits	Drawbacks
Smaller funds. A reliable broker provides leverage that allows you to trade with a small amount of money. Tesla stock has already reached $1,000 per share. So, if you buy real shares, $100 won't be enough to make a good profit.	Not real. When trading stocks, you don't own real shares.
Buy and sell. No matter where Tesla stock moves, you can both buy and sell it based on the current market situation.	High risks. Market volatility increases relative to the timeframe. The smaller a timeframe is, the higher volatility is. Also, trading brings higher rewards. Remember the simple rule: high rewards require high risks.
Don't rush. The stock market is highly volatile, so you need time to evaluate the situation. Even if you miss a good entry point today, you might get a chance to enter the market tomorrow.	Short-term horizons. There are long timeframes, but most traders prefer trading in smaller ones. It's unlikely that you'll keep a trade position for a year. If you have little funds, you won't be able to survive the high volatility that the stock market sees.
Ease. To open a trade position, you need to conduct an analysis, but that's still easier than investing.
Fast profit. To benefit from trading, you sometimes need only several minutes if you choose small timeframes.

Analyse and Forecast

Whether you decide to trade or invest, you'll need to analyse the market. There are two major types of analysis you can apply: technical and fundamental analysis.

Fundamental Analysis of Tesla Shares

Let's consider factors that are crucial for Tesla stock analysis. At the beginning of the article, we mentioned that Tesla stock experiences significant fluctuations due to earnings reports, Musk's tweets and products' success, all of which affect the stock's value.

Check Musk's tweets, Tesla earnings reports, and product releases to succeed in fundamental analysis.

News. If you want to succeed in trading or investing in Tesla stock, you should follow the news about the company, and especially Musk's tweets. Previously, we gave two examples of how his thoughts have affected market conditions.
Earnings report. Because Tesla is not a blue-chip company yet, its value is subject to market conditions. If the industry or the whole global market survives hard times, the company's rewards will decrease.
Financial data. The balance sheet and income statement will determine the company's health.
Products' success. Tesla's products are not always successful, so if you want to predict the stock's price, you should check the company's releases.

Technical Analysis of Tesla Stock

Technical analysis is based on chart patterns and indicators. If you've ever traded forex, you know how indicators work. Stock trading doesn't differ a lot from forex trading. That means you can use such famous technical indicators as the Awesome Oscillator, RSI, MACD and Fibonacci Retracements. Volume is also worth using.

All you need to do in technical analysis is to learn how indicators work. This will help you determine the perfect point to buy or sell Tesla stock.

You can read experts' analyses if you feel you don't have enough knowledge to predict market moves. Experts provide both signals and comprehensive analysis in the context of current market circumstances. Some brokers offer free analysis for their traders.

How to Reduce Risks in Trading Tesla Shares

In general, stocks are risky assets, but Tesla's stock poses even more risks to traders and investors. There are several rules that will help you prevent possible losses or at least reduce them while trading Tesla stock.

Analyse the market. As we mentioned above, there are several approaches to analysis you can use to predict market direction.
Practise. There's nothing better than practising and learning from your own mistakes. However, to lower your chances of losing your money, you should open a demo account to practise with. Libertex offers this kind of account.
Choose a trustworthy broker. No matter how well you analyse the market, if your broker is dishonest, you'll end up on the losing end. Check the terms and conditions, the law under which the broker provides its services and the platform you'll use to trade.

Conclusion

To conclude, Tesla stock experiences high volatility because it's a relatively young company compared to its blue-chip counterparts. As such, if investors or traders want to deal with these shares, they should be careful and follow money management principles. At the same time, Tesla offers exciting opportunities, especially for traders who are eager to catch sharp market fluctuations. Moreover, the price of the stock is low compared to blue-chip companies.

To learn how Tesla stock moves on different timeframes, sign up for a Libertex demo account that reflects real market conditions and provides the full range of indicators you can use to predict the direction of Tesla's stock without risking real money.

Check our answers to the questions investors most frequently ask before investing in Tesla shares.

FAQ

Is Tesla Stock a Good Investment?

Tesla's stock is a good investment if you're familiar with high market volatility. Its shares' value changes fast, so you should be careful and apply strong risk management principles.

Does Tesla Pay a Dividend?

Tesla Inc. doesn't pay share dividends and doesn't plan to do so anytime in the near future.

Does Tesla Have a Direct Stock Purchase Plan?

Unlike other high-cap companies, Tesla doesn't provide a direct stock purchase plan. So, if you want to invest in its stock, you need to find a reliable broker.

How to Buy Tesla Stock

To buy Tesla stock, you need to find a brokerage firm and open an account. You can also trade stock CFDs, which are an easier way to deal with Tesla stock.

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.

Why trade with Libertex?

Get access to a free demo account free of charge.
Enjoy technical support from an operator 5 days a week, from 9 a.m. to 9 p.m. (Central European Standard Time).
Use a multiplier of up to 1:30 (for retail clients).
Operate on a platform for any device: Libertex and MetaTrader.