A guide to how to invest in stocks and shares for beginners

Published On: September 19, 2020Categories: Investment Tips4.2 min read

Stock trading has become a great way for investors to not only save for their retirement but also make an income, and for some, to make a fortune if one knows how to invest in stocks and shares for beginners. Stock investment used to be the domain of big companies and individuals with high net worth, but this has started to change with the introduction of cheaper broker fees and more knowledge of the stock market.

The stock market works much in the same way as an auction – buyers and sellers negotiate a price that they are both comfortable exchanging for an asset, in this case shares of companies.

Companies looking to raise capital, list their shares through the process known as an initial public offering (IPO). Once their stock is public, individual investors and institutions can start to trade shares.

Individuals who believe that a company will see strong growth will buy the shares, may be for a low price so that they can make a profit when they sell it at a later date. While individuals who believe a company may not see strong growth would sell the shares, aiming to make as much as possible for their shares so that they turn a profit or cut a loss.

You have to be registered to trade directly on an exchange, so most people will go through a stockbroker. In the case of leveraged trading, your provider will take the place of a broker – opening and closing positions based on your instructions. Today, the majority of retail stock trading takes place via an online trading platform.

Initially, a company will set a price at which it will list on a stock exchange – known as its IPO price. After that, fluctuations in the share price are caused by changes in the supply of, and demand for the stock.

  1. Stock Trading for the Beginner

Stock trading seems to be a great way to save money or earn a living. However, stock trading is a simple way to invest in the ownership of companies that an investor considers to be profitable.

  1. What is the Stock Market?

If you are going to invest in the stock market in the UK, it means that you will need to buy and sell stocks in companies that you like. Like any other market, the stock market is a central place where stocks and shares in companies are exchanged on a daily basis.

  1. Stock Prices and Quotes- How to use them

When you trade in the UK stock market, you need to know the stock prices. The stock market over time has come up with its own method of showing prices and price changes. A good stock trader should understand how to interpret these stock price quotes.

  1. Stock Index

Investors need to figure out how stocks are doing in comparison with competitors or other companies in their sectors. Stock indexes were created to make it easy for investors to compare the performance of companies within a sector or compare one sector to another.

  1. Stock Brokers

If you plan to buy and sell stocks on the London Stock Exchange, you will need to use a broker. An investor has a choice in terms of the type of stock broker he needs.

Stock Brokers

  1. Stocks and Mutual Funds

A trader’s profit may rise depending on the number of stocks he/she trades in. However, profit also depends on the added risk the individual stock trader will take.

  1. What are Penny Stocks?

Penny stocks or Penny shares are becoming more popular with individual stock traders. There are risks and rewards in trading in penny shares in the UK. Some of these risks can be avoided even if the rewards in trading in penny stocks are very high.

  1. What are Stock Options?

Most small stock investors think of stock options in terms of their employment package. However, stock options in the UK are a great method of leveraging investor money in order to make a profit. Both the seller and buyer of stocks can make a profit when trading stock options.

  1. Fundamental Analysis

Stock traders need to know which stocks or shares are good for them to invest in. Fundamental analysis is one of the ways which is used by stock traders in the UK to decide on the stocks that are likely to be profitable.

  1. Technical Analysis

Other than fundamental analysis, some stock traders use technical analysis to decide on the best stocks to trade.

  1. How to Research Stocks

The biggest challenge is how to choose and find the best stocks to invest in. There are various methods including visiting your full service stock broker and even through monthly or weekly newsletters.

  1. Stock Splits

UK companies have a number of tools to attract as well as retain shareholders. The more shareholders a company attracts, the more likely it will fetch a higher price. One of the most common tools used by companies is called stock splits.

  1. Stock Trading Signals

After trying to pick good stocks and failing, some stock investors in the UK tend to look for an alternative especially if they are not confident of their knowledge about the stock market. Stock trading signals companies were created for this type of investor.

  1. Trading Strategies

Most stock investors in the UK use various stock trading strategies to find the best stocks to invest in. Some of the strategies require discipline on the part of the investor in order to be successful.

About the Author: Jonathan Adams

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