Want to get into trading? Here’s how to choose the right online trading platform.
Online trading makes it easy and affordable for anyone to invest in stocks and build a portfolio. There are multiple platforms available that will allow you to trade on the New York Stock Exchange, NASDAQ and other markets, all from your computer or mobile phone. While online trading carries risks, it’s a versatile way to invest your money and has the potential to help you increase your net worth. Learn how online trading platforms work, how to make money from them, what sort of fees you’ll pay and what all that confusing terminology really means.
Everything you need to know to start trading online
How does online trading work?
Trading is a more involved approach to investing. Instead of borrowing money or trying to raise capital, companies sell shares (partial ownership of the company) to raise funds for expansion. Shareholders buy and sell shares through stock markets, which provide continuous updates on the prices of those shares. The value of a company’s shares changes daily, so shareholders aim to buy shares when they cost less and sell when the price increases in order to make a profit.
Trading is also commonly referred to as buying stocks — this is the same thing as buying shares. In the past, trading was traditionally done on paper at stock exchanges but has since involved
How do you trade shares in the US?
For US-listed companies, all trading is done through the United States Securities Exchange (referred to as the SEC), which lists more than 2,000 companies. Overseas shares are traded on a variety of exchanges, including the Shanghai Stock Exchange (SSE) and the London Stock Exchange (LSE).
How do I buy shares in a company?
In the pre-Internet era, the only way to buy or sell shares was through an individual broker, which was often expensive and time consuming. Online trading means investors can buy and sell shares directly in real time. While there are still fees involved, going online is far cheaper for individual investors. To buy a share online, you will need to create an account with an online trading platform.
What is a blue chip share?
Blue chip shares are large companies that are financially strong, and have a solid track record of producing good earnings to shareholders. Typically, they are industry leaders and household brands. Investing in blue chip shares could be a good strategy for beginners, as they are usually considered to be very stable and have been in the market for a long time. For example the AT&T, Johnson & Johnson, Facebook and 3M are considered blue chip shares.
How can you make money from shares?
There are two main techniques:
- If you can sell your shares for a higher price than you paid for them, then you’ll make a profit. This is possible both with short-term investments (where you sell the shares after a brief period of time) and over longer periods. When you’re starting out, aiming for longer-term investments makes sense as you’re less experienced.
- Some companies pay regular dividends to their shareholders, based on the amount of profit they make. This can provide an ongoing income stream and may also have some tax advantages for individual investors.
How can I choose the best share trading platform for me?
- Compare commission fees. Some brokers may charge extra for different types of orders or specialized investment products. High-value trades are often charged as a percentage of the total trade value, rather than having a fixed fee.
- Availability of advice and research options. Online brokers will usually offer market news and updates, as well as other research tools that will let you investigate the trading history of individual stocks.
- Integration with bank accounts. Some services let you transfer money easily from your trading account to a savings account. Others offer linked debit cards to use with your accounts.
- Access to other markets. If you want to invest in offshore exchanges, check the options are available with each service.