- Ready to invest in Snowflake for exposure to the data industry?
- See what to look for in a broker and compare different order types.
Snowflake (NYSE: SNOW) This cloud-computing and data warehousing company gets its name from the founders’ love of winter sports. SNOW is a leading large-cap, offering plenty of trading opportunities throughout the year.
This brief guide gives you the basics of understanding everything you need to know to trade SNOW stock.
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Benoit Dageville, Marcin Zukowski, and Thierry Cruanes founded Snowflake Inc. in 2012, with headquarters in San Mateo, CA. However, the company only started serving the market two years later, in 2014.
SNOW posted 2020 revenues of $592 million, launching its IPO in September 2020 at an opening price of $75. With a 113% gain in share price on its first trading day, SNOW was one of the most successful IPOs of the year and the biggest software development company IPO of all time.
Where to buy Snowflake stock
Still not sure about which stock broker to use? Check out our comparison of stock trading apps to compare fees, tradable assets, and more.
Step 1: Open an account with a trading platform
To trade SNOW stock, you're going to need to sign up with a broker. The broker provides you with market access and the tools you need to trade. Here are the critical features to look for in your broker.
With trading apps like Stash, Robinhood, Webull, and M1 Finance offering commission-free trading, it wasn't long before the big brokerage firms followed suit. Now you can get zero-commission trading from a variety of large brokers like TD Ameritrade and Fidelity.
Fractional share trading
A single share of SNOW is expensive and might be unaffordable for new investors. Therefore, if you're starting with a small account, you can reduce your risk through fractional share trading, while giving you exposure to the price action in SNOW.
Low account fees
Brokers compete for your business, and they do it by offering discounted fee schedules. The costs of trading vary from firm to firm, so shop around for the best deal.
Brokers offer margin accounts to help you grow your small account balance fast. With margin, you access "leverage" on your account, letting you buy up to six times more stock of selected companies using your account balance. Margin trading can come with a downside, requiring you to put up more money if the trade goes wrong and the share price starts falling.
Real-time data and charts
Trading platforms include charts with pricing which may be delayed by up to 15 minutes. For live market data, you'll need to pay your broker an additional monthly subscription fee.
Step 2: Transfer funds into your trading account
Brokers let traders fund accounts using debit cards and bank wire transfers. The bank wire is the more expensive option, and funds take longer to reflect with the broker.
When funding your account, the broker needs to complete its due diligence and verify your identity. They also need to open and register your account and deposit your funds. It could take the broker up to 15 working days to finish these tasks and activate your account.
Step 3: Set your investment budget
When funding your account and placing trades, you need to assess your risk management strategy. How much can you afford to lose in a single trade? Could you handle that loss, or would it leave you in financial distress?
Only fund your account with money that isn't detrimental to your financial well-being. Professional traders recommend that you never risk more than 5% of your account balancer on a single trading opportunity.
Step 4: Share of stock or ETFs?
Traders can choose between buying SNOW shares or purchasing an exchange-traded fund (ETF) for their trade. An ETF is a weighted basket of stocks wrapped into one financial vehicle, and it trades like a stock.
With ETFs, you get exposure to SNOW price action, but without the added risk of placing all your eggs in one basket. Examples of ETFs holding SNOW stock include the Vanguard Total Stock Market ETF and First Trust Dow Jones Internet Index Fund.
Step 5: Configure your order
When placing your order for Snowflake stock, you'll need to use one of the following order types on your trading platform.
The market order will let you get into a stock at the next price quoted by the market. Unfortunately, if you want to enter $SNOW at $150, you might end up filling at $155, with the difference being the "slippage" in the trade.
The limit order is a way of mitigating the slippage you get with market orders. You'll enter the price you want to pay for the stock, and when the broker fills your order, they only buy stock for you at this price. It prevents slippage, but the downside is you might only get a partial or no fill if the prices move fast.
The stop-limit lets you sell your stock when you reach your desired profit target. For instance, you enter SNOW at $150, with a price target of $170. When the prices rise to meet your target, the stop-limit order automatically sells you position.
The stop-loss order helps you manage your risk in the trade. If you enter SNOW at $150, you'll place your stop at $145. Even if you're logged out of your account and as long as the trade has not expired, the stop executes if the price drops below $145, liquidating your position to prevent further losses.
Step 6: Place your order
After reviewing the different order types, you'll need to use them to place a trade. After settling on your risk management strategy and order type, it's time to start trading SNOW stock. Open your trading platform, and wait for it to populate.
Enter the SNOW ticker into the relevant fields, and complete the rest of the fields with your share size, order type, and limit price in the appropriate boxes.
When you're ready to buy, click the order, and once your trade execution is confirmed, you hold SNOW stock. When you achieve your price target, hit the sell button, and the broker liquidates your position, returning your capital and profits to your trading account.
Step 7: Monitor how Snowflake performs
SNOW sees its best days for price volatility during market announcements of new products or new partnerships. Tech trends in cloud-based services may also affect the stock price, so it might also be worth tracking similar stock like Palantir and Fastly, as well as broader tech stocks including Amazon, Alphabet, Microsoft, and Cloudflare.