Want to try your hand at stock trading but not sure how to start? We here at AQUMON understand how overwhelming market information can be, especially for new investors. That’s why we have summarized the 5 KEY TOPICS to kickstart your journey to become a trading expert!

 

This blog post will cover…

 

1. What is the stock market?

 

2. General stock trading fees

 

3. Types of orders

 

4. How to read stock charts

 

5. Common financial indicators

 

 

1) Introduction to the Stock Market

 

Before we discuss how to analyze and trade stocks, we must first learn about how the stock market operates! 

 

Q: Does the stock market operate 24 hours a day? When can I buy and sell stocks?

 

A:  No, the stock market does not operate 24 hours a day. Both Hong Kong and U.S. stocks can only be traded at specific times as follows: 

 

 

 

Q: I’ve heard about the Hang Seng Index before. What is it used for? 

 

A: Each stock market has its own representative index that reflects the city/region’s stock markets. The Hang Seng Index (HSI) is an indicator index that reflects the Hong Kong stock market. It is calculated from the market value of the 55 Hang Seng Index constituent stocks.  Indices allow investors to compare and analyze the performance of individual stocks or overall market trends.

 

The 55 constituent stocks of the Hang Seng Index are large and representative stocks selected from the four major industry classifications (Financial, Utilities, Property, and Industrial & Commercial). These blue chip stocks include Tencent (0700.HK), Alibaba (9988.HK), HSBC (0005.HK) and more.

 

Fact: Blue Chip Stock refers to a huge company with an excellent reputation. Typically has a market capitalization in the billions. 

 

Given that the U.S. stock market is much larger than Hong Kong’s, it has three major indices: the Dow Jones Industrial Average (the “Dow”), the NASDAQ composite index (NASDAQ), and the Standard and Poor’s 500 (S&P 500). 

 

Related: U.S. Indexes All Beginner Investors Should Know

 

Q: One lot? One share? What is the trading unit of a stock? 

 

A: Hong Kong stocks are generally traded in board lots (a trading unit which is determined by the issuer). The number of shares ranges from 100 shares to 2,000 shares per lot and is determined by the issuing company. 

 

For example Tencent (700.HK) minimum lot size is 100 so this means at HK$433.4 per share, you’ll need a minimum of HK$43,340 to buy 1 lot of Tencent. 

If that is too much money, you can also consider trading odd-lots which means trading shares below the minimum lot size. The Stock Exchange of Hong Kong (HKEX) trading system does not automatically match odd-lot trades, but investors can still trade odd-lot stocks through a special lot market.

 

However, in the U.S. market, investors are able to trade individual shares. As such, the minimum investment threshold is much lower than that of Hong Kong stocks. For example, the current share price of Microsoft (MSFT) is approximately US$296.9* (~HK$2,316), which is lower than many Hong Kong lot prices. Investors can also buy fractions of a share through other trading platforms.

 

*Data as of Sept 14, 2021

 

 

2) Stock Trading Fees

 

Besides the initial capital required for investing, investors also need to pay certain fees throughout the trading process. The fees charged for trading stocks vary across different financial jurisdictions. 

 

Q: What fees do I need to pay when investing in stocks? 

 

A: Investors need to pay fees such as brokerage, transaction levy, and trading fee. Charges vary from different securities firms. (Check out AQUMON’s fee structure for your reference!)

 

Note that a 30% dividend tax will be charged by the U.S. Internal Revenue Service upon any dividend revenue received by HK investors purchasing U.S. stocks.

 

 

 

 

3) Trading Prices

 

After understanding the basic operations of the stock market and its fees, you can start trading! The following are the basic trading orders, such as "limit orders" and "bidding orders".

 

Q: How many different types of “orders” are there? 

 

A: HKEx's trading system only accepts five types of orders: 1) market orders, 2) market limit orders, 3) limit orders, 4) enhanced limit orders and 5) special limit orders.

 

 

Limit Order VS Market Order: Both Available in AQUMON

 

 

 

4) How to Read Stock Charts

 

Once you have familiarized yourself with the entire trading process, it is now time to choose what to invest in! It is essential to find a stock that meets your ideal return and risk tolerance. Therefore, investors must learn to do simple analysis in order to choose the right stocks for themselves.

 

Q: Stock charts look cramped and complicated. How do I read them?

 

A: Stock charts can tell you a lot of information about a stock such as price changes, current trading prices, historical highs and lows, and so on. You can “see” the story behind the stock by looking into its chart. Without looking at the chart you are basically flying blind with your investments.

Besides the usual line charts, investors may need more information so we often see red and green K-line charts, also known as candlesticks because of their candle-like shape.

 

K-line charts show the opening, high, low and closing prices of a stock, and also reflect the rise and fall of the stock at a given time. 

 

 

Longer candles indicate that the market price of the stock is more volatile.  On the other hand, if the candle is very short, it means that the opening and closing prices are very close to each other and the price is more stable.

 

Related: A Beginner’s Guide to Stock Chart Reading 

 

 

5)  Common Financial Indicators

 

When analyzing a company's business, novice investors must learn some basic financial metrics to determine a company's operating efficiency and profitability. The most common financial metrics are return on assets (ROA) and return on equity (ROE).

 

Q: What are ROA and ROE?

 

A: Return on assets (ROA) is the ratio of after-tax net income to a company's total assets. It reflects how well a company is able to generate profit from all their available assets.

 

Return on equity (ROE) is the ratio of after-tax net income to shareholders' equity. It reflects how efficiently a company is able to use their invested capital to generate profit.

 

Q: How can I use these financial ratios to make investment decisions? 

 

A: Since different industries have different profit models, ROA is generally used to compare the performance of different companies in the same industry. ROA is more valuable for heavy industries that rely more on assets, such as manufacturing and transportation.

 

The difference between ROE and ROA is that ROE does not take into account the source of funding from loans or liabilities, so investors can compare ROA and ROE to see how much a company relies on liabilities for its working capital. Therefore, ROA is also suitable for industries with high debt ratios.

 

Generally speaking, high ROA and ROE indicate that a company is operating efficiently and effectively converting its assets into profits. However, investors should also pay attention to the difference between ROE and ROA: if ROE is high but ROA is low, it means that the company's profits are created from a high debt ratio (which makes the investment riskier).

 

Before making each investment decision, investors should clearly measure risks and returns, and do their homework to achieve your financial goals through investment.

 

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In addition to our flagship ETF portfolios and thematic stock portfolios, AQUMON has also launched our stock trading service!  

 

Stock trading service highlights: 

 

• Intelligent stock recommendation function, automatically recommending similar quality stocks

• 24/7 real-time foreign exchange, supporting different currencies

• Cover major stock markets (Hong Kong, mainland China and US).

 

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Download the AQUMON app now!   

 

Related: AQUMON Stock Trading Features

 

 

 

 

 

About us

AQUMON is a Hong Kong based award-winning financial technology company. Our mission is to leverage smart technology to make next-generation investment services affordable, transparent and accessible to both institutional clients and the general public. Through its proprietary algorithms and scalable, technical infrastructure, AQUMON’s automated platform empowers anyone to invest and maximise their returns. AQUMON has partnered with more than 100 financial institutions in Hong Kong and beyond, including AIA, CMB Wing Lung Bank, ChinaAMC, and Guangzhou Rural Commercial Bank. Hong Kong University of Science and Technology, the Alibaba Entrepreneurs Fund, affiliate of BOC International Holdings Limited, Zheng He Capital Management and Cyberport are among AQUMON's investors. 

 

The brand is held under Magnum Research Limited and is licensed with Type 1, 4 and 9 under the Securities and Futures Commission (SFC) of Hong Kong. AQUMON is also licensed by the U.S. Securities and Exchange Commission (SEC) and the Asset Management Association of China (AMAC).

 

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