Stock types are an essential component to a stock trader’s investing basis. Traders and investors need to know the distinction between different stock types. Knowing stock types are so important because it allows traders to deduce and select the correct stock for their personal financial goals and risk appetite.
Stocks are categorized under different labels which allow traders to sift through stocks with ease making for more efficient trading. Below are the major stock types most frequently utilized by stock traders.There are two main types of stocks including common stock and preferred stock. Although there are many differences between the two, the primary difference is that preferred stock generally does not give shareholders voting rights whilst common stock does.
Cyclical stocks are stocks that react in conjunction with current economic conditions. This means that when economic conditions are favorable, these companies tend to perform well. Automotive companies are examples of cyclical stocks, as people tend to spend more on automobiles in good economic conditions.Non-cyclical stocks are more contradictory in their reaction to economic conditions. These types of stocks perform well during periods of adverse economic circumstances.
We recommend that you seek independent advice and ensure you fully understand the risks involved before trading. Information presented by DailyFX Limited should be construed as market commentary, merely observing economical, political and market conditions. This information is made available for informational purposes only. It is not a solicitation or a recommendation to trade derivatives contracts or securities and should not be construed or interpreted as financial advice.