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A guide to online stock trading for beginners

stock trading

What are shares?

Shares refer to the units into which a businesses’ capital is divided. If you own a share in a business then it is a measurement of a unit of ownership in a business, asset, etc, and permits you to claim a part of the businesses’ profits throughout the year. In a best-case scenario, shares are issued by a business that is trying to raise money from the general public. By purchasing these shares, you will also obtain a percentage of ownership within the company. There are a number of options for buying shares that can make online stock trading for beginners simpler.

What is a share price?

A share price is the value of a single company share. This usually represents the lowest possible amount of money that a company is willing to allow a share to be sold for in the stock market.

Can you purchase shares online in the UK?

There are usually two primary options for online stock trading for beginners in the UK. The first and most popular of the two is to buy shares from a brokerage online which provides a digital share certificate that represents the number of shares you bought and own as a result.

Online stock trading for beginners involves making an investment account through your brokerage and then transferring funds into the account and buy the shares.

The second option for online stock trading for beginners is to buy Share CFDs online.

Can you sell shares online in the UK?

You can sell shares online in the UK, however, it is much easier to sell CFDs online. You do not have to make sure that you have notified your broker beforehand about your decision to close or open a position. You have a lot more control over your investments and the process that you take through them.

How to buy shares in a company?

To get started, you need to think about ways of getting a hold of shares. Below are some of the most common methods:

Online Broker: This is the easiest and safest method of online stock trading for beginners in the UK. All you have to do is open and verify your account, deposit some funds and then choose the shares you want to invest in.

Traditional Stockbrokers: This is becoming less popular, but setting up with a traditional stock brokerage provides you with the ability to buy UK shares over the phone. However, you still have to open and verify an account with the brokerage. These are now considered less convenient and are becoming more costly as well.

Mutual Fund: This is a good route to consider if you want your finances to be managed by someone else on your behalf.

CFD Broker: This is the best route if you are only planning on selling and purchasing for a short period of time.

No matter which one you choose, you must always ensure that the platform you choose is regulated by the FCA and holds a tier one license.

Getting started:

Select a platform on which to buy shares

That being said, there’s are a number of FCA regulated brokers in the online space, so you’ll need to spend some time to find an online stock trading for beginners platform that meets your needs.

Despite the many different options, going with a broker could be the best choice for a beginner. This is because of the cost, convenience, and support available when purchasing through online brokers.

Open an account and purchase a share

When you have decided on a brokerage that suits you the best, you can then move into opening an account with that broker.

Verify your identity

All regulated broker platforms must comply with the relevant UK laws on money laundering, so you will need to pass a basic KYC process in order to verify your identity. Via a regulated platform, you will be required to provide your identity in order to prevent fraud. You’ll be required to upload a government-issued ID and proof of your address.

Deposit funds

Upon opening your account and verifying your identity, you are now ready to go. But before you can begin to purchase shares, you will need to deposit funds into your account.

Choose the shares you want to buy

Once you have money in your account, you can purchase whatever shares you choose. The easiest way to find a company that you are looking to invest in is simply by searching for online stock trading for beginners’ options.

Finish off your purchase

After deciding on the business you want to invest your money in, you can go ahead and finish off the purchase. Keep in mind you will have to decide the amount of money you want to invest in the business. There are no restrictions on the amount of money that you can invest in buying shares.

How to make money from an investment?

Once you have bought shares from your brokerage, the next step is to try and make a profit in the long-term. The ways you can achieve this is either through capital gains or dividends.

What are capital gains?

No matter who you invest within, the goal for online stock trading for beginners will always be to make capital gains. This means profiting from the price difference of shares. So, technically you are looking to sell your share for higher than what you purchased it for originally, thus making a profit per share.

What are dividends?

The alternative method to earn a profit is through dividends. This is when a company shares out its profits to the shareholders of the company, though not all businesses do this.

For how long should you hold shares?

This answer will be specific to you and your chosen investment, but usually, you should hold for at least five years on a share.

How to reduce risk?

No matter what asset you invest in, there will always be a risk factor. That is why having a risk plan is important and the most common way of mitigating your risk is through diversification. This essentially ensures that you do not put all your eggs in one basket by investing in a number of companies across sectors in order to spread out or ‘diversify’ your trading portfolio.

Diversifying with single trade

There is a way to diversify across businesses by placing just one trade. This is by going across multiple markets and index’s using just one commodity.

How to find a broker?

It is important to find the online stock trading for beginners platform that you feel is best for you and what you are looking for with your trading experience. The guidelines listed below will help you know what to look for when picking a platform to invest in:

Regulatory requirements

The most important aspect when it comes to choosing an online stock trading for beginners platform is finding out whether or not it is regulated by the FCA.

Deposits and withdrawals

The most optimal online stock trading for beginners platform usually allows the ability to choose from a multitude of options when it comes to withdrawing or depositing in your account. Additionally, you need to find out the deposit and withdrawing fees that the broker has put in place.

Disclaimer: The opinions expressed by our writers are their own and do not represent the views of Precise Investors. The information provided on Precise Investors is intended for informational purposes only. Precise Investors is not liable for any financial losses incurred. Conduct your own research by contacting financial experts before making any investment decisions.

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