Global Stock Trading: How to Trade Global Stocks?

Today's traders have access to shares, indices, commodities, and securities traded on various exchanges around the globe. While traders may have once had to jump through hoops to trade foreign instruments, financial institutions have developed a host of technologies to make the process of trading global instruments more manageable than ever. 

While the choices for opening positions may seem limitless, traders need to know which one is the best fit for them.

TL;DR 

• Local Brokerages: Convenient for trading well-known global stock indices like the Nasdaq 100 or FTSE 100, but may have limited access to less popular or regional markets. Watch out for tax and regulatory issues.

• Mutual Funds: Offer global exposure with a hands-off approach. You don’t own individual assets; you just have a stake in the fund. Limited control over asset choices but potentially fewer direct trading/tax complications.

• CFD Trading (e.g., via Plus500): This allows access to thousands of global instruments without owning the underlying assets. It offers flexibility (go long/short), leverage, and useful tools, but it carries higher risk and possible fees.

Local Brokerages

Traders may find it easy to find a broker in their local region who can help them open positions on shares or securities traded on the New York Stock Exchange, Nasdaq, and even the London Stock Exchange.

However, finding a broker who can help traders reach other exchanges may be a challenge.

Some of the reasons that a local broker may be unable to help with trading global stocks may include low popularity, a lack of connections with brokers in the regional market where you want to trade, or a lack of regulatory approval.

In addition, traders should be aware of the tax implications where they live as well as in the country where they will open the position.

Mutual Funds

Mutual Funds help traders gain global exposure by pooling various shares and securities and selling them as a package. 

When purchasing a share in a mutual fund, traders do not buy the individual securities that make up the fund, but instead buy a piece of the fund itself. A mutual fund purchase exposes traders to whichever underlying assets the fund manager chooses. 

If a trader likes the fund but disagrees with the fund manager’s decisions, they do not have the option to avoid including that security in the fund they are holding. They can either sell their stake in the fund, usually executed only at the end of the trading day, or hold on to the asset and hope that its value rises.

Mutual funds may be ideal for traders who prefer a slightly more hands-off approach. They also help traders avoid various fees and tax implications that may directly result from trading in foreign markets.

CFD Trading

Contracts for Difference (CFDs) allow traders to gain access to global markets by opening positions that do not require purchasing the underlying asset. What’s more, people who trade with Plus500 have the option to go long or short on thousands of instruments that may not be readily available to them through local brokers. 

Rapid executions and the ability to trade with leverage are only a part of what makes CFD trading with Plus500 a preferred choice for some traders.

For example, a trader in Spain believes that the price of Airbus (AIR.DE) shares, which are traded on the Frankfurt Stock Exchange, will drop. In order to go short on Airbus shares, they will need to find a broker who deals with the exchange and manages the fees that apply along the way, which can compound depending on how many brokers are involved.

Alternatively, they can open a CFD ‘Sell’ position with Plus500 through the online platform and gain leveraged exposure to the shares without having to find a broker. What’s more, Plus500 offers historical charts, an economic calendar, indicators, and other critical information that allows traders to plan their trades. CFD traders will still need to consider the increased risk involved when trading with leverage and any potential fees they may incur.

Ultimately, trading CFDs on global stocks or other assets such as indices or commodities on an online platform such as Plus500 opens up traders to a world of trading possibilities beyond what may be available to them on their local exchanges.

Conclusion 

Thanks to technological advancements and online platforms, global trading is more accessible than ever. Whether you're working through a local broker, investing in mutual funds, or exploring international markets through CFDs, it's important to align your strategy with your risk tolerance and trading goals. For those looking for flexible, global opportunities with fast execution, platforms like Plus500 offer a gateway; just be sure to understand the risks before jumping in.