The Basics Of Trading U.S. Markets

By Hooi Mun Keong, Digital Educator

Trading On One Of The Most Exciting Stock Markets In The World Can Be Exhilarating.

Owning shares in companies that you hear on the news, who keep breaking barriers with their latest groundbreaking developments.

But there are a few things you should know BEFORE dipping your toes into the U.S.

Why is this important to know? We want you to expand your investing pot smartly and when you look at the US, with close to 6,000 stocks listed in NYSE and Nasdaq, it can be very easy to forget the basics.

So here we go:

Thing 1: More than 1 U.S Stock Market Index

There are over 5,000 U.S. indexes but it’s important to know the three most widely followed indexes would be the first step; Standard & Poor's 500 (S&P 500), Dow Jones Industrial Average (DJIA) and Nasdaq Composite Index (NASDAQ)

 

S&P 500

They measure the top 500 companies in the U.S. based on their market capitalization (share price x number of shares available in the market). What's interesting is, the S&P tracks roughly 80% of the overall value of the U.S. stock market, which makes it the best indicator to determine its overall direction and health.

Stocks on the S&P 500: Amazon, Berkshire Hathaway, Apple, Meta (aka Facebook), Microsoft and Tesla.

 

DJIA

Created in 1896, it is one of the oldest indexes in the world and like our Kuala Lumpur Composite Index (KLCI) it tracks the performance of the top 30 largest companies on the Exchange.

Stocks on DJIA: American Express, Coca-Cola, McDonald's, Visa and Walmart.

NASDAQ

It is a tech heavy index that is designed to represent the entire Nasdaq market – that's why you don't see it tracking specific top tech companies.

Stocks listed on the NASDAQ: Adobe, Netflix, NVIDIA, PayPal, PepsiCo and Tesla. 

Thing 2: Trading Units

The minimum trading unit of a U.S. stock is 1 unit. This means that you can purchase a famous U.S. share like Coca-Cola (KO), listed on the NYSE, at USD60* (about RM 250) per share.

Compared with when you purchase Bursa shares, you can typically buy it in odd (100 units per share) or board lots.

You may have seen this term “fractional shares” floating around and what it means is that a trader can buy a portion of a stock and gradually build up to own a full share. This is ideal as for many it can be too expensive to own say Tesla at USD1,050* (about RM 4,392) from the beginning, so you buy it in fractional shares.

Note: While we don’t offer fractional share trading yet, it is on our radar so stay tuned!

Thing 3: Currency Conversion Rates

In addition to paying the normal trading fees like brokerage and other Exchange fees, the currency conversion rates play an important role for obvious reasons. When you trade US stocks, transactions are in USD. This can be rather painful for those of us earning Ringgit Malaysia. Slight functions in the value of our Ringgit will determine a net profit or loss on your trades.

Do check the conversion rate before making a trade.

Read More about Fees

 

Protip: At Rakuten Trade, you do not need to convert your funds into USD prior to and after trading. We will convert it for you. The exchange rate is displayed when you're about to make a trade as highlighted in the red box. Upon selling of shares, it will be converted into USD (based on the fixed exchange rate of the day) before transferring back into your Cash Upfront trading account.

Thing 4: Trading Hours

So now we come to the trading hours. As New York is 12 hours behind Malaysia, trading on that market can be a bit tricky for Asians – especially when daylight savings time kicks in.

U.S. market trading hours are based on Eastern Standard Times (EST). Like trading shares on Bursa, you can place orders before the marketing opens but it will only be matched during market hours.

And there you have it! All the basic info to need to get geared up for share trading on the U.S. markets.

If we’ve convinced you and you’re eager to start investing in the land of cheeseburgers, how about activating your foreign market service now. It’s super simple (via your dashboard) and completely FREE.

Or if you haven’t yet signed up with us, do so now via a Cash Upfront Account and don’t forget to activate your foreign market service AFTER you’ve been approved. 

Not yet sold? Check out our other RakuCampus blogs.

RakuCampus US #1: Reasons To Trade U.S. Markets

RakuCampus US #3: Fees & Corporate Actions [coming soon]

RakuCampus US #4: US Companies Issuing High Yield Dividends [coming soon]