A new side-job?

Youth unemployment has become a significant effect of our current economic crisis. You might have gone through the trouble of applying for the lowest paid jobs in your area and you are told the place has been taken. You might want to look into a new unconventional method of earning money on the side. The trading business. Trading stocks might seem inaccessible to students as you do not have the capital to invest on the stock exchange. First of let me tell you how trading stocks works and secondly how CFD-investing has enabled people with small amounts of capital to be able to earn some money. And thanks to the invention of online brokerage, all you need is about a hundred dollars, a laptop, pc or smartphone and internet connection.

As you probably know, if a corporation thinks it needs funds it can decide to give out stocks. This can be done in private, inviting a private investor to directly buy a part of the company or by registering at the exchange. Now you’ve probably seen the graph of an exchange before, it fluctuates. Earning money on this fluctuation is called trading. The middle-man enabling people to buy from the exchange is called a broker. There is two ways to earn money on this: buying and shorting. Buying is the most obvious and concerns a trader buying a stock or a contract for the current market price and selling it when the market price is higher thus earning a return on the difference. Shorting is basically the opposite. If you short a stock you actually bet your broker the market price of that specific stock is going to fall and if you turn out to be right you profit on the difference of the fall. Advanced traders earn on the difference of milliseconds and people investing their capital on the side or to secure a pension for the difference of years or even decades. For a student the most profitable time-span would be minutes if you have some spare time or hours if you are in class.

CFD is an abbreviation for Contract For Difference. This means you are not buying (or shorting) a stock but you are trading with a leverage. Say you have a hundred bucks. You want to buy Acompany’s stocks which are at a market value of $50 per stock. You expect that during one math class the value is not going to change more than a dime so you think it’ll only be profitable if you have a hundred of Acompany’s stocks. The initial problem: you’re a student and don’t have $5000. So if you buy with a leverage your broker actually buys the stocks for you and by your Contract For Difference entitles you the change in value once you sell the stock. Now you think Acompany’s is going to rise in value so you decide to take the risk and buy a hundred stocks with your hundred dollars. After your math class you check the Nasdaq and you see Acompany’s stock value is now $50.10 and you decide that’s enough and you want to sell. Since that’s only a dime on one stock it might seem like a bad deal, but remember you bought a hundred stocks. With you math mind still on you find out that makes ten dollars. You sell the stocks and you now have an available equity(=investment capital/value) of $110.

Now this is a greatly simplified example on trading but if you are interested in earning money during your classes or while making your homework leave a comment and I’ll post some more explanations on capital investment.