How To Buy Amazon Stock

How To Buy Amazon Stock

Welcome to Trading Brokers step by step guide to buying Amazon stock. Here you will find an easy to understand explanation of trading Amazon stock. This includes how to buy Amazon shares online, what you need to trade Amazon stock and how to open a trading account with a stock broker so that you can buy Amazon stock online today.

Amazon has generated immense wealth for its shareholders, with the company becoming one of the most valuable companies in the world. The good news is that the company is continuously looking to diversify further and grow, which is an excellent prospect for its shareholders and customers. However, the stock quickly prices-in all the available information about the company. Therefore, you should analyse all the important aspects of the business before investing in any stock. Whether you are looking to speculate, invest or just learn more, this guide on how to buy Amazon shares can help you along your journey.

Overview of Amazon

Jeff Bezos, in 1994, founded Amazon as an online bookseller, but the company has grown to become one of the most valuable companies in the world alongside Apple, Microsoft, Google, and Facebook. The company has expanded its services and now offers e-commerce, cloud computing, streaming, video on demand, artificial intelligence, and many other services.

The company is the largest e-commerce service provider, with an annual turnover of billions of dollars. Amazon, with its long list of subsidiary companies, has turned into a technology giant. Amazon offers a wide range of products and services, some of which are listed below:

  • Amazon Web Services (A subsidiary of Amazon that provides cloud computing platforms for individuals and organizations and uses a pay-as-you-go pricing model)
  • Alexa (Virtual Assistant AI technology)
  • Amazon Kindle (E-reader devices)
  • Kindle Store (online ebook store accessible through Amazon Kindle, Amazon Fire, and Kindle app)
  • Amazon Appstore (Amazon Appstore for android)
  • Amazon Publishing (Book publishing unit of Amazon)
  • Whole Foods Market Inc. (supermarket chain of 500+ stores, owned by Amazon that sells organic whole foods free from artificial preservatives, flavors, etc.)
  • Amazon Audible (Amazon’s subsidiary, where users can purchase audiobooks and podcasts)
  • Amazon Studios (Amazon’s subsidiary — film production and distribution service provider)

The wide-ranging products and services of Amazon make it a highly-diversified company, with revenues coming from a variety of businesses. Retail sales of both online and offline stores contribute a major share to Amazon’s revenue and account for more than 50% of Amazon’s net sales. With more than 33% market share in the cloud computing market, AWS (Amazon Web Service) contributes about 12% to Amazon’s net sales.

Amazon’s Stock

The company, after its IPO in 1997, raised $54 million at $18 per share and turned profitable in 2003. On February 04, 2020, Amazon crossed the $1 trillion market capitalization mark, joining the elite club of Apple, Microsoft, and Alphabet. Currently, the share price of Amazon is hovering above $3,000, gaining an absolute cumulative return of more than 16,500% since its IPO in 1997. Resultantly, Jeff Bezos — founder, chairman & CEO of Amazon — became the richest person in the world, with a net worth of more than $180 billion.

Investing in Amazon

Investing in Amazon stock is when you buy Amazon shares to own them outright, usually with a view to holding them for the long term. Investors would usually look to buy Amazon stock in order to try and make a profit when the Amazon stock price increases in value. According to WallStreet analysts, Amazon’s stock price is currently forecast to grow 22% over the next year (2021).

Trading Amazon stock

Trading Amazon stock is when a trader speculates on the movement in the Amazon stock price without actually owning the shares in Amazon. Traders tend to buy and sell Amazon stock on a more frequent basis, usually speculating on daily, weekly or monthly price fluctuations.

You can buy and sell Amazon stock online through various methods including spot markets, futures contracts, options contracts, spread bets, CFDs (contracts for differences) and ETFs (exchange-traded funds).

Amazon CFDs

One of the most popular ways to trade Amazon stock is via CFDs (contracts for differences). When trading Amazon CFDs, you do not actually invest in Amazon shares, meaning you are not tied to them. You are only speculating on the rise or fall of the Amazon stock price. A CFD is a financial contract, typically between a broker and a trader, where one party agrees to pay the other the difference in the value of a security, between the opening and closing of the trade.

A CFD trader can go short or long, set stop and limit losses and apply trading scenarios that align with their own personal objectives. Traders would open long (buy) positions, if they think the stock price of Amazon will rise or short (sell) positions if they thought that the Amazon stock price will fall. The difference in price between the entry and exit price is the traders realised profit or loss, excluding any broker commission and fees.

For example, if you think Amazon shares are going to increase in price, you could buy a share CFD on the company. You will exchange the difference in price between when your position is opened and when it is closed, earning a profit if the shares increase in price and making a loss if they decrease in price.

On the contrary, if you think Amazon shares are going to decrease in price, you could sell a share CFD on the company. You will still exchange the difference in price between when your position is opened and when it is closed, earning a profit if the shares decrease in price and making a loss if they increase in price.

Amazon futures

Futures contracts are an agreement to buy or sell a specified asset at a certain date and price. Amazon investors can use futures trading to speculate on the price movement of Amazon stock in order to try and make a profit. Traders would look to go long (buy) a futures contract if they believe the price will rise or short (sell) a futures contract if they believe the price will fall. The difference in price between the price at the start and expiry date of the futures contract is the profit or loss from the contract.

Amazon spread betting

Spread betting is a financial derivative that enables traders to speculate on Amazon stock falling or rising without taking ownership of the underlying asset. If the trader makes a correct prediction and the asset does move in that direction, they could make a profit, minus any broker fees. On the other hand, if the price moves against their prediction, they would incur a loss.

Financial spread betting is similar in ways to CFD trading except that you are betting a fixed amount per point on the Amazon stock price movement (either up or down) and then pay or receive the difference between the opening and closing price of the bet.

Amazon options

Amazon options are financial instruments that are derivatives based on the value of Amazon’s stock. Traders usually enter into calls when they expect the price of the underlying asset to increase, and puts when they expect the price to decrease. Option contracts come with an expiration date before which the holder needs to exercise their option to buy or sell an underlying asset at an agreed-upon price. The stated price on an option is known as the strike price.

Buyers can choose to exercise their calls and puts or not whereas sellers are obligated according to the buyer decision. Therefore, the sellers (writers) can be exposed to more risk than buyers whose losses can be limited to the premium paid for the contract in the instance they do not exercise the contract. On the other hand, sellers could lose more depending on the Amazon market price.

Amazon ETFs

Exchange Traded Funds (ETFs) enable traders to invest in a basket of securities that trade intraday like individual stocks on an exchange, and are typically designed to track the performance of an existing market or group of markets.

Each ETF is usually focused on a specific sector, asset class, or category. ETFs can be commonly used to help diversify an investment portfolio and create a mini-portfolio, or, for the active trader, they can be used to try and take advantage of price movements.

Amazon is included in various ETF’s with shares in the U.S. ETF market. Traders who are interested in trading other companies alongside Amazon, may consider ETFs.

Where to buy Amazon stock?

Stock trades are processed via a stock exchange, where a stock broker represents each investor. The majority of investors will nowadays use an online stock broker to buy and sell stocks through a stock trading platform which will enable them to connect to the stock exchange. You can see a selection of our best stock brokers below with whom you can open an account to trade stocks online.

Broker
Rating
Regulated
Min. Deposit
Founded
Max. Leverage
1.

ASIC, BVI, CBI, FFAJ, FSA, FSCA

Min $100 Deposit

2006

1:400

Review Trade! Trade!
Terms & conditions apply
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
2.

FCA, CFTC, NFA, BaFin, FINMA, ASIC, FMA, MAS, FSA, FSCA, DFSA, JFSA, METI, MAFF

Min $250 Deposit

1974

1:200

Review Trade! Trade!
Terms & conditions apply
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.
3.

ASIC, FCA, DFSA, SCB, CySEC, BaFin, CMA

Min $200 Deposit

2010

1:500

Review Trade! Trade!
Terms & conditions apply
CFDs and FX are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
4.

ASIC, CySEC, IFSC, DFSA

Min $5 Deposit

2009

1:888

Review Trade! Trade!
Terms & conditions apply
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 78.28% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
5.

ASIC, CySEC, FSA

Min $200 Deposit

2007

1:500

Review Trade! Trade!
Terms & conditions apply
Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Why trade Amazon stock?

Trading the stock market has become a popular investment activity for many people, especially with the technology that we have these days making it more accessible than ever. There are a vast number of trading brokers, trading platforms and trading apps available for buying and selling Amazon stock with relative ease. The cost involved to get started makes trading Amazon stock accessible to traders of all experience levels from across the globe.

The availability of leverage has also contributed towards the increase in aspiring traders. Leverage allows traders to hold a position size greater than they would have been able to without it. E.g. An account balance of $1,000, could take a position size of $5,000 with 1:5 leverage. Whilst this can increase potential profits, it also greatly increases risk. It is therefore of the upmost importance that you have a clear understanding of the significant risks involved with online trading, especially when using leveraged positions.

The majority of traders would look to buy and sell Amazon stock to try and earn profit from the variation in Amazon’s stock price. When trading Amazon CFDs you can speculate long and short on prices rising or falling without actually needing to invest in Amazon shares. This can make it a more convenient trading method for anyone who has a trading account with an online broker. Alternatively, long term investors may purchase traditional shares in Amazon’s stock for a more long-term hold.

Buying Amazon stock can also be a way to diversify a trading portfolio and to hedge against shares in other stocks or investments in other asset classes such as forex, commodities, precious metals and cryptocurrencies.

However, before investing in Amazon, it is important you understand the dynamics that affect the Amazon stock price.

What drives Amazon’s Stock?

Stock prices can move as a result of different factors. Therefore, as an investor, you must monitor those factors to make an informed investment in any stock. In the following section, we will discuss some key factors that drive Amazon’s stock price.

Macroeconomic situation

Since more than 50% of Amazon’s sales come from its retail section, any changes in retail sales can significantly affect its revenues and profitability. Retail sales depend on the macroeconomic conditions of the economy: when the macroeconomic conditions are encouraging and the economy is thriving, with people having more disposable incomes, the retail sales will likely increase and will toss Amazon’s share price upwards. On the other hand, a cut in disposable incomes of the consumers will diminish the retail sales, negatively impacting Amazon’s revenues.

Acquisition of new companies

Over the years, Amazon has successfully acquired numerous companies to grow into the behemoth that it is today. Any new acquisitions by Amazon can translate into market share growth with additional revenue, turning into more profitability. Therefore, you should keep yourself updated about the latest news about any possible acquisitions by Amazon as it can be a huge driver of Amazon’s stock.

Earnings Reports & SEC filings

Amazon’s quarterly and annual earnings reports, along with its SEC filings, also drive its share price. Many major stock movements occur after a company releases its earnings reports. Sometimes, the earnings exceed analysts’ expectations and result in a jump in the share price. If the company announces disappointing earnings and misses the analysts’ expectations, the stock price dwindles. Therefore, you must pay close attention to the earnings reports and read its SEC filings to know about the future direction of the stock price.

How to trade Amazon stock online?

If you have taken the time to read through the above, you should hopefully have an understanding of how to trade Amazon stock online. Here is a summary of the key steps:

1.     Decide if trading Amazon stock is for you

Trading Amazon stock online carries an element of risk and can take more time than other forms of investing. You will need to research the company, manage your positions, follow market news and decide how to react to it. It is important to understand the risks and dedication that comes with trading Amazon stock online.

2.     Educate yourself

Before trading Amazon stock, it is imperative to learn as much as possible about investing and trading online. Any mistake could prove to be costly. There is an abundance of free educational materials provided by many online brokers that can help you to improve your trading skills and knowledge.

Most brokerages will also provide a free demo trading account so that you can practice trading Amazon stock online with virtual funds in order to familiarise yourself with the trading platforms and practice your trading strategies until you feel confident enough to open a real trading account.

3.     Choose an Amazon stock broker

In order to trade Amazon stock online, you will need a broker account and trading platform to execute your trade positions through to the market. When choosing a broker, there are a few important things to consider such as regulation, commission fees, platforms, tools, education, funding options and customer support.

If you do not have the time to research brokers, you can see a list of our best brokers that we have already prepared to help traders. If you would like to know more, you can also view our detailed guide on how to choose a trading broker.

4.     Research Amazon

If you have made it this far then you may be ready to start trading Amazon stock online! The next step is to research Amazon to help increase your knowledge in the company. The best brokers should have this information conveniently displayed for you within their trading platform.

5.     Have a trading plan

Some of the most important factors that can help determine Amazon stock trading performance can be the trading plan and discipline. It is important to have a solid trading plan personalised to your own needs that includes the money management and trading strategy that you will use. Most experts and professional traders would try to not let negative emotions such as fear, anger and greed affect their trading strategy.

6.     Buy and sell Amazon stock

Once you feel ready to trade Amazon stock online, you can analyse the market to help decide if and when you will place your trades. After placing a trade on Amazon, you will need to keep track of how it performs and manage it according to your trading plan. Some investors will keep hold of Amazon trades for the long-term, whereas traders may buy and sell Amazon stock on a daily basis.

Is trading Amazon stock right for me?

Trading Amazon stock is a popular choice for long-term investors and active traders. It can be suitable for scalping, day trading and swing trading. Traders who would usually trade forex, trade indices, trade commodities, trade cryptocurrency, may look to diversify their portfolio.

However, it is important to understand the significant risks involved with trading Amazon stock online, especially when using leveraged positions. Most experts would suggest trading on a demo account with virtual funds to begin with.

This can be a useful way to familiarise yourself with how to trade Amazon stock and using trading platforms whilst allowing you to practice your trading strategies until you feel confident and produce consistent results. Most stock brokers provide unlimited demo accounts free of charge.

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