Investing

Introduction to Online Trading

What sort of image does Wall Street conjure up for most people? While the financial crash of 2008 might have taken some of the romantic sheen off the world of the stock market, it’s still seen by many as the realm of the rich and powerful, a place where fortunes are made and lost. But with the development of online trading, this world is accessible to everyone with a computer, enough money to invest and a decent financial history. There’s no need to have your own broker or a small fortune to do it; but since you’re putting your hard-earned cash into the hectic world of the stock market then it’s best to know what you’re getting into.

Basics of the stock market

When we talk about owning stock in a company, we literally mean owning a small percentage of that company. When a company offers their stock for sale the people who buy it are shareholders. Under normal circumstances, a broker who is licensed to trade stocks will act as the intermediary between companies and those who want to buy their shares. Online trading tends to remove the human element and you’ll use an online broker to buy and sell your stocks, instead of talking to someone about investments, you make the decisions as to when to buy and sell right from your computer. You don’t have to experience the frantic atmosphere or the trading floor at, say, the New York Stock Exchange.

Choosing a broker

Before you start investing your money, you’ll need to choose an online broker who will carry out your trades and store your balance. There’s plenty of choice out there but no matter which broker you go with there are several key decisions to factor in. How much money have you got to invest, how often will you be trading, and what is your level of experience? Most brokers will require that you have a certain amount of money to begin investing; look at the relative costs of frequent and infrequent trading, there will be a small fee per trade and if you’re buying and selling often then this can add up; and if you don’t have much knowledge about trading then you’ll usually end up spending more on a brokerage that offers market analysis and tips on successful trading.

Making trades

After you’ve opened your account and added some funds, you can begin trading. But before you buy anything you’ll want to get a real-time update on the price of that stock. Some brokers offer this as part of their fee or you can use financial news sites but these are usually behind the current state of the market so might give an incorrect quote on the stock price. When you’ve decided to bite the bullet and purchase some stock, don’t expect the trade to happen instantly. As with real-world trading, it takes a while to find a buyer or seller, and you can only actually trade when the markets are open. If you need a guide, why not take a look at how to buy shares with ANZ or another similar online trading company.

There are risks involved, to be sure. Stock prices can change drastically especially if a business’ reputation comes into question. Thankfully, with a bit of research you can protect your investments against fraud and other unscrupulous activities. The most important thing to remember is: if a deal looks too good to be true it probably is!     

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