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Apple business explained
Apple is a technology company whose business model includes the design and manufacture of electronic products, software and online services. It also includes the commercialization of these products, since the company itself owns more than 400 stores worldwide.
Since its founding and the success of Apple II in 1976 until today, Apple went from being a garage company to what it is today: one of the top 5 and largest companies in the technology sector along with Google, Facebook, Microsoft and Amazon. Apple being the first company to reach a market capitalization of more than 1 trillion dollars.
Apple products and innovation
Being Apple a technology company, it has a serious commitment to innovation. That is why year after year we see how Apple creates new products or improves existing lines. Just look at the evolution of the iPhone, iPad or Mac, to which we can add the Apple Watch and Apple TV.
In addition to this and framed in its business internalization model, Apple developed its own processor called Apple M1 which will be used in all its devices, thus eliminating the dependence it had on chips manufactured by Intel.
With the Apple M1, the company has promised that all its devices will make a quantum leap, starting with Macs. Although it is certain that they will then start using their Apple M1 in all other devices.
The secret of Apple's business
In addition to what was exposed in the previous point, much of Apple's success is given by its marketing strategy. This strategy goes from the most basic: creating the need for the product; to the most important: building customer loyalty.
Apple takes the latter to the point that its customers are its best marketing and there is no need to give much explanation about this. After all, we all know an Apple user who recommends and defends to the death all Apple products.
The success of Apple products and the Apple brand is fully reflected in its stock price. This is how Apple's share price went from $ at the time of its IPO, to the prices we have today.
And given the nature of Apple as a company, it is only natural that its share price will continue to rise over time.
What are the assets you can trade?
Meet ETFs
What do you know about Exchange-traded funds? They are similar to index funds and are known for merging the benefits of stocks and mutual funds, because they can be traded at any moment in the market, but have much more diversity and considerably lower rates.
Foreign exchange
Currency trading or Forex consists, as the name says, in the exchange of currencies. Put differently, is the conversion of one currency to another, and the aim is, evidently, to obtain a benefit out of this.
If you decide to exchange euros and dollars, you speculate how many dollars it will take to buy a euro, with the expectation that after obtaining the first currency (the euro) it will raise its price compared to the second (the dollar), to make a profit by selling it. Suppose you entered when the price of one euro is 1.10 USD and you close when the price has gone up to 1.15: that difference is yours once you make the operation.
As you may have deduced, this kind of trading requires investing a lot, because prices never increase that much, or using much leverage, which implies an extra risk. Our recommendation for those starting in the world of trading is to choose another market to begin with, since Forex is risky and complex.
The most common currency pairs are available on this broker but keep in mind that in this market sales are made through contract for differences, thus you will not be the owner of the real asset.
About Contracts for Difference
It is possible that you have found the term CFD all the time if you entered this broker before. Before we explain this further, we must say that CFDs on this broker are only possible when you short sell or leverage over x2 (nevertheless, this is not even available on the platform).
For the record, and if you want to know about day trading cryptocurrency and other more advanced operations, next we will also cover terms such as leverage and “going short”.
The advantage of this broker is that it allows you not only to bet “in the black”, but with CFDs you can also bet “in negative”. Let's say that you have the certitude that the Apple will fall, so you obviously think “if it is going to depreciate, I'll just wait and bet when it has gone down”. 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, roughly, like this:
- You ask someone for a loan of, let's say, 100 units of Apple, which total value at that moment is $ 5,000 (obviously, these figures are made up)
- Then, you sell them at their price at the moment, $ 5,000
- As you guessed, the price falls, and the unit of Apple goes from $ 50 to $ 30
- Again, you purchase the 100 units, but now their value is $ 3,000
- Now you return the 100 units to whoever made the loan in the first place
- The rest is yours, so, you will have made $ 2000
Consider that it sounds much more complex than it is: we can just say that by trading in Apple you can also make money if you foretell it will fall.
What is leverage
Do you know what leverage is? 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.
Everything you need to know about leverage
Let's pretend that you are confident that Apple will rise, and you consider “going long, but you only have $ 1,000 available. However, it is possible to put more and earn higher profits.
You could consider asking for a credit at your bank or other financial company, but you must know that all the process takes time, and by the moment you receive the money, Apple might be already so expensive (if your guess was right) that trading wouldn't be convenient anymore.
Using leverage, you can get that amount just by clicking your mouse. It's like borrowing money, but much better: from the broker itself. You can get financing to operate with much more money than you actually have on the the broker wallet. Before trading, you will how much leverage to use as in the image below:
Trading with other assets allows you to use more leverage. This is because cryptocurrencies are usually medium-long term investments. However, leverage is used mainly for short-term operations or day trading. Let's talk a bit more about how leverage works.
If for your investment of $ 1,000, you use leverage x2, you will be investing $ 2,000, as we mentioned. The broker would be “loaning” you the extra $ 1,000.
A week after that, turns out that Apple valuation goes up and now the value of your investment is 20% higher, which means, you have $ 2,400 in Apple shares. So, a wise decision is to sell them back now.
Obviously, the 1k $ from leverage will be deducted, and you'll have $ 1,400 left, of which $ 1000 was yours initially, so you'll have earned $ 400.
In conclusion, by investing $ 1000 you can make a profit of 40% (in the case you earn $ 400). That is quite good.
It may sound too good to be true. The thing is, it can also play against you. If everything goes as you planned, you will earn more money in less time; however, if the value of the asset decreases, you will also lose more in less time.
For example: if instead of increasing by 20%, the price falls by 10%, you won't lose $ 10, but $ 20, because of the leverage. That is why to operate with leverage it is crucial to be familiar with other two terms: Take Profit and Stop Loss.
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 Apple shares at $ 100, you request the broker to close once it reaches $ 120. That way, you make sure you won't change your mind and decide to keep waiting in case it keeps going up, which could make you lose it all.
Stop Loss is even more necessary, particularly if you use leverage, since a small loss with leverage can be tragic for your wallet. Take into account that your broker will recommend a limit for Stop Loss, but you should place it lower than the platform suggests.