The UK is home to some of the largest companies in the world, some of which are known internationally. Because of this, the stock market has open access for anyone who wishes to invest their money into firms that they deem to be promising. Trading stocks can be done through many different means, including online trading platforms, by speaking with a broker over the phone or physically going into a branch office. If you find this interesting, you should consider trading stocks.
So How Do You Go About Trading Stocks?
Trading stocks is relatively simple – if you have money to invest, whether it’s £1 or £500,000, you can purchase shares in any company of your choosing. Depending on how much you’re looking to invest, you can either go through a stockbroker who will process your trade-in exchange for a fee (pricey, but worth it if you decide to buy and sell frequently) or use an online trading platform.
Before you can buy and sell stocks, it’s essential to understand exactly what you’re doing. Using quantamental analysis, you could identify stocks that are mispriced and avoid them.
Open an Account
Before you’re able to start trading stocks, whether through a stockbroker or online trading platform, you’ll have to create an account. Most websites will require you to provide your date of birth and National Insurance Number to verify your identity with the UK government. This is necessary since some companies are deemed “regulated activities” under the Financial Services and Markets Act 2000 (or MiFID), meaning they must comply with specific rules and regulations if they wish to be licensed.
Decide How You Want To Trade
You now have access to a trading account, but what next? Numerous accounts allow you to buy and sell stocks, each with different benefits and drawbacks. For example, a dealing account allows you to buy and sell shares repeatedly, while a stock lending account gives you access to an income from stocks without actually owning them.
Pick A Stockbroker Or Trading Platform
With your trading account open, it’s time to choose the type of service you want to provide your trades – either online or over the phone via a stockbroker. Unlike platforms that only offer limited features, brokers have historically been considered more reputable due to their history in the industry. However, this doesn’t mean that they’re guaranteed safe since some have gone bankrupt or turned out scams.
Understanding The Price
Before you can buy and sell stocks, it’s essential to understand exactly what you’re doing. Shares in companies are traded at a price per share – meaning that if one company is selling for £2/share and another share at the same value, only the first will be bought (meaning your effective gain will be less). Some platforms let you make market orders to get around this, ensuring that all your trades happen at the “right” moment once the trade has been made.
Decide How Much You Want To Invest
Before you start trading, it’s crucial to understand how much money you want to invest in stocks. It’s essential to think about the stock itself – how strong of a business is this, what are its growth prospects and so on? You also have to consider your budget for buying shares since they can become costly when dealing with large companies. If you’re not ready yet, then wait – investing requires patience if you wish to make more money in the long term.
Make Your First Trade
Once the above has been done, it’s time to put your plan into action. You can now start buying or selling shares according to your investment strategy. If the company is currently doing well, the chances are that there will be an uptick in demand which will cause the price to go up (i.e. you can sell for more than what you bought for). If it’s doing poorly, people will most likely sell their shares to limit their loss – causing the value of each share to go down (meaning you can buy for less than what you sold them for).
Monitoring Your Stocks
Do not be content with watching your stocks grow or shrink automatically – make sure that you check in on them every few days to re-evaluate your investment strategy and potentially adjust if needed. If you’re lucky, they’ll skyrocket in value quickly, which means that you can start making money off of them almost immediately.