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Cannabis Trading – How to trade cannabis stocks

Ben Weiss, Wednesday, 31 July 2019

Cannabis
The cannabis industry is unique. Its legality is still widely debated today, and only a handful of countries and states allow for even medicinal use, let alone recreational. But the momentum it has gained is undeniable, and it’s clear more and more people are wanting to learn about cannabis.

With its growing popularity, the industry is becoming more widely accepted and there’s now an array of cannabis companies emerging.

Naturally, interest in cannabis has transcended across to the trading world. Cannabis markets are now available to trade, giving you the chance to take positions in the most popular cannabis stocks. Here’s everything you need to know about trading cannabis stocks including what they are and how to trade them.

  1. How to trade cannabis stocks?
  2. What are cannabis stocks?
  3. Best way to trade cannabis stocks
  4. What cannabis stocks can be traded?
  5. Why trade cannabis stocks?
  6. Is cannabis a good investment?
  7. Advantages of trading cannabis stocks
  8. Disadvantages of trading cannabis stocks
  9. Is trading cannabis stocks legal?

1. How to trade cannabis stocks?

Trading cannabis stocks really couldn’t be much easier with ETX Capital. Here’s a quick three-step guide.

Step 1. Sign up for an ETX Capital account  

Sign up for an ETX Capital account. Of course, it’s absolutely free and in a matter of minutes, you could be ready to begin your trading journey with a multi-award-winning broker. If you’re unsure about anything, you can contact our Customer Service team on 0207 3921 494 or email us at customer.service@etxcapital.com with any questions you may have, and a member of the team can talk you through the process. Sign up here.

Step 2. Search for the cannabis markets

We have several cannabis ETFs (Exchange-Traded Funds) and cannabis stocks available to trade on our TraderPro platform. Once you’re in the platform, use the search bar in the top left corner. Simply type in ‘cannabis’ and press the search icon. A list of every cannabis market we offer will then be displayed.

Cannabis step 2

Step 3. Select the market and open a position

Then just select the intended market and open up a trade ticket. From the ticket, you can determine how much per point you would like to trade and what stops and limits you’d like to apply. 

Cannabis step 3

2. What are cannabis stocks?

Cannabis stocks are like any other regular equity, and they can be traded the same way you’d trade the likes of Apple of Facebook. The cannabis industry is segmented into three broad sections; growers, suppliers and bio tech companies. As the name suggests, the growers are the firms that produce the product, but also distribute and sell it. The suppliers are companies that aren’t necessarily involved in cannabis specifically but supply the tools to the growers to produce the cannabis on a large scale. Biotech firms work on innovation and ways to get the product to industry in a more efficient manner.

3. What’s the best way to trade cannabis stocks?

The best way to trade cannabis is on our award-winning platform, TraderPro. TraderPro gives you unprecedented customisability, instant execution and comprehensive risk management tools all in one easy-to-use platform. Having won numerous awards, most recently ‘2019 ADVFN Best Spread Betting Platform’ and ‘2019 OPWA Best Trading Tools,’ we know TraderPro is seen by many as the best trading platform around. It equips traders with the best possible tools to make their trading effective and efficient, so why trade cannabis anywhere else?

Trade cannabis now.

4. What cannabis stocks can be traded?

At present, we offer a number of top and most in-demand cannabis stocks. We are always looking to add to the 5,000+ markets we offer on our platform, so if there is a particular company you had in mind that you were looking to trade, get in touch with our trading desk. Here is the full list of the cannabis markets that we offer for spread betting and CFD trading.

  • Aurora Cannabis Inc
  • Canopy Growth Corp
  • AdvisorShares Pure Cannabis ETF
  • AdvisorShares Vice ETF
  • ETFMG Alternative Harvest ETF

Canopy Growth is known to be the largest cannabis company in the world.

5. Why trade cannabis stocks?  

Cannabis is an emerging industry that looks set to be embraced by more and more societies in the future. Where cannabis was once a sensitive subject that was widely scrutinised, it is now at the least accepted for debate, and in the best cases fully embraced for medicinal and recreational purposes. Canada and a number of US states have already legalised it for both medical and recreational use, and more countries are set to follow suite.

As more countries do or do not decide to legalise cannabis, the industry as a whole is bound to stay in the spotlight. There will therefore be no shortage of news and media coverage to help you base your trading decisions around.

So, before the cannabis industry expands and hits the global mainstream as many believe it soon will do, why not get involved in the cannabis markets? Join one of the few brokers that offers a wide range of cannabis trading opportunities on an award-winning platform.

6. Are cannabis stocks a good investment?

Of course, as with any trade risk is involved. Just because the industry could breakout and be successful, it doesn’t mean that every cannabis company will as well. Picking the correct one is going to be the issue.

What’s more, the CBD industry is something that will correlate closely with cannabis and its subsequent success. CBD, short for cannabidiol, is one of the most prominent compounds found in cannabis along with THC. THC is the part of cannabis that makes a person ‘high,’ whereas CBD carries most of the medicinal benefits such as combatting schizophrenic tendencies, reducing pain and easing anxiety.

CBD is becoming increasingly popular, and many well-known athletes and celebrities are advocates. Where there was once just simply CBD tablets, now the industry has expanded to chocolates, coffees and even popcorn. So, it will be important to watch how this industry progresses in relation to the cannabis industry.

Overall though, it seems that cannabis might be a decent trading opportunity. The industry has the potential to grow, and with ETX’s excellent risk management tools, you can open positions and mitigate risk when the markets do go against you.

7. Advantages of trading cannabis stocks

  • Get involved in an undeveloped market

The cannabis market has very little precedence. This can be a negative (as we state below), but it’s also a big plus. With no detailed history to look back over, the industry will always be venturing into unchartered waters until certain practices are an industry-wide ‘standard’ for the manufacturing, distributing, selling and regulating is established. As a consequence, it can provide an exciting opportunity to trade, as industry-defining news that has the potential to heavily impact the markets could occur more regularly than a ‘normal’ stock.

  • Financially back newcomers

Being an up-and-coming market, many new firms are entering the industry. It’s far from saturated, so the barriers to entry are a lot lower. Although there are firms who have been around for a while, every company has had to adapt to the legalisation in Canada/US, so have effectively all have started from a level playing field. A firm just entering the industry now is at a little disadvantage to those already established in the industry but compared to other industries that gap is miniscule.

Think about if a new social media company was to try to compete with Facebook and Twitter now. It would more than likely fail – as Google’s did quite recently. However, a company entering the cannabis industry is not as so much of a disadvantage to the other firms in the industry, as in general, the industry as a whole is not developed enough for one or two companies to begin monopolising the market.

 8. Disadvantages of trading cannabis stocks

  • Little or no precedent to base decisions off

Little precedent can mean the market is unpredictable, and it also means there’s not as much for traders to base their decisions on. For example, those traders who are into their technical analysis will have a smaller data sample to analyse from. Established markets have illustrious histories that go back far. Any and every scenario that could happen, has most likely happened before. As a result, some believe it’s easier to predict price changes.

With no precedent, trades will be based purely on opinions of the trader from the knowledge they’ve accumulated. This is not necessarily a deterrent to trade, but it simply means that trading is influenced by real-world facts and sentiment as apposed to historical market data.

  • Greater risk

Of course, a consequence of getting involved in a market that is so new is that there is going to be that unpredictability factor that goes with it. With new firms entering the industry en-masse, a large proportion of those have or will later fail. So, investing and trading these stocks come at a greater risk as you’ll be trading firms that have been established this decade as opposed to this century. 

  9. Is trading cannabis stocks legal?

Yes, trading cannabis stocks is legal in those countries where financial trading is legal. Although cannabis usage is not legal in many countries, the stocks and ETFs we offer are all companies residing and operating in legal areas. Trading cannabis stocks is no way involves owning part of the physical commodity, it is simply speculating on the price of a company.

Cannabis legality mapMap showing the legality of cannabis across the world. Multiple sources (CC BY-SA 3.0). 

Key

Blue: Legal or essentially legal
Orange: Illegal but decriminalised 
Pink: Illegal but often unenforced 
Red: Illegal 
Grey: No data 

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