What does Xiaomi do?
Xiaomi Corporation is a company of Chinese origin in the technology sector that manufactures and markets electronic equipment, the best known being its smartphones. But what really makes Xiaomi famous is the “value for money”, being Xiaomi itself that defines itself as “a global company that manufactures quality products at honest prices”.
It was founded in 2010 by Lei Jun and Lin Bin, with 2011 being the year when they launched their first smartphone in the Chinese market. This was the first big step of the company that from that moment on would have a history full of successes. And perhaps the first milestone was in 2013 when it surpassed Samsung and Apple in sales for the first time in China.
And since then, the company's commercial success internationally has been an outright affront to other smartphone manufacturing companies. Especially as Xiaomi's market share grows year after year, snatching space from Samsung and Apple.
The Xiaomi model
On several occasions, one of Xiaomi's founders (Lei Jun) has stated that the company prices smartphones only slightly above the manufacturing cost price. And it does this without sacrificing the quality of the components, offering a high quality product at low prices compared to other brands.
And this translates into a volumetric sales strategy, i.e., offering quality at a low price to sell more and thus make a good profit. This model, although it may seem simple and trite, has worked so well that its market share is growing by 16% annually. In the European market, this growth has reached more than 50%.
Despite this, and the fact that more than 90% of its revenue comes from the sale of mobile devices, the company continues to categorize itself as a software and internet company. This has generated criticism of Xiaomi from Samsung and Apple for “not generating innovation” in any area.
Depending on who looks at it, the latter may or may not be true. But what is absolutely clear is that Xiaomi offers equipment with the same features of high-end equipment from other brands at a price up to more than 3 times lower, which has guaranteed its commercial success.
Finally, Xiaomi does not use traditional advertising media and focuses on social networks. In addition to building customer loyalty so that they are the spokespersons of the brand. Very similar to what other brands do, isn't it?
The fact is that, regardless of the criticism, Xiaomi is an established company with a business model that has given it such strength that it is practically impossible for Xiaomi to disappear in the future.
What financial instruments can you trade?
ETFs or Exchange-Traded Funds are similar to index funds. They can be described as a combination of stocks and mutual funds. They are publicly traded, that means they can be exchanged at any moment at market price. However, their advantage is that they are more diversified compared to stocks, and have lower fees.
What are Contracts for Difference?
It is possible that you have found the acronym CFD all the time if you entered this broker before. Before we explain this further, you must know that cryptocurrency trading on the platform is only CFD when you short sell.
FYI, and if you are interested in day trading cryptocurrency or other trading operations, we will also refer to terms like short-selling and leverage.
The advantage of this broker is that it allows you not only to bet “in the black”, but through CFDs you can also bet “in red”. Let's say that you have the certitude that the Xiaomi will go down, so the logical thing is to think “if it is going to depreciate or go down, I'll simply wait until it does”. But if it really falls, it might mean extra money for you.
The practice known as “going short” will allow you to do that. It functions, pretty much, as it follows:
- You get from a loan 100 units of Xiaomi, with a total price of $ 5,000 (these are completely made up numbers)
- You sell the 100 units at $ 5,000
- As you thought, the price falls, and the unit of Xiaomi goes from $ 50 to $ 30
- You purchase the 100 units again, but at $ 3,000
- You return the 100 units to whom made the loan
- The difference is yours, so, you will have made $ 2000
Take into account that it is much simpler than it sounds: we can summarize this whole operation by saying that by trading in Xiaomi you can also make money if you foretell the downs.
What is leverage
Do you know the term “leverage”? We'll put it simply: trading allows you to invest more money than what you really have. Let's say that you have $ 100 and you choose to leverage x2, the amount of your investment will be $ 200.
About leverage, Take Profit and Stop Loss
Assuming that, for instance, you are certain that Xiaomi price is going up, and that you have $ 1,000 for “going long”, you should know that you have the option of investing more and making more money.
You could consider requesting a credit, but you must know that all the process takes time, and when you receive the money, Xiaomi might be already so expensive that investing wouldn't be convenient anymore.
Using leverage, you can obtain that amount of money really easily. It's just like borrowing money, but much better: you will get it from your broker, which lets you invest a lot more than you have on the platform. Before trading, you will be able to choose between the different options as in the image:
Trading with other assets allows you to use more leverage. The reason: cryptocurrencies are a value that is invested in the medium-long term. However, leverage is used primarily for short-term operations or day trading. But let's see how leverage works.
If you have the $ 1,000 and use leverage x2, you will be investing $ 2,000. The broker puts the remaining amount to reach that figure.
A few days later, as you predicted, Xiaomi price increases by 20% and your money has appreciated reaching $ 2,400. But you don't want to take too much risk, so it's time to sell back.
You need to pay back the $ 1,000. You have $ 1,400 left, of which $ 1000 is the money you put in yourself, so the net profit is $ 400.
In conclusion, by investing $ 1000 and obtaining $ 400, your net profit would be 40%. That is quite good.
But not everything is wonderful. If everything goes ok and the price rises, you will make money. On the contrary, if the asset decreases, you will also lose more money than you invested.
For instance: if the price falls by 10%, you won't lose $ 10, but twice (the leverage) that figure, that would be $ 20. For that reason, the terms “Take Profit” and “Stop Loss” are crucial when using leverage.
Take Profit is used as a form of reducing risks when trading. When you enter, you can set a profit limit and ask that your position is automatically closed when the asset reaches a price.
If you bought Xiaomi shares at $ 100, you program your broker to close your operation when it reaches $ 120. That way, you make sure you won't be blinded by greed and decide to keep waiting in case it keeps going up, which could be a mistake.
Stop Loss is even more important, especially if you use leverage, because a reduced loss with leverage can be tragic for your wallet. Take into account that the broker will recommend a limit for Stop Loss, but it is better to set it lower than the platform suggests.