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“Online stock trading is about risk and reward, but there are ways to minimise your risk by doing the research, picking a platform to suit your financial circumstances, and being patient if the market takes a dip.”
Golden rules for stock trading
With online stock trading you're looking for short-term gains in what can be a volatile market. Doing your research when picking which stock to invest in, when to buy and when to sell, is extremely important.
If you're not an experienced trader, it can help to pick a share trading platform that gives you the insights you need to make those decisions. But keeping yourself informed and up to date about how the market is performing will help you hone those skills over time.
That said, even the most experienced traders lose money from time to time, as there is always a risk when trading stocks.
Investing in a wide range of stocks can help to maximise returns. A broad portfolio is more resilient to economic changes as different stocks react in different ways to the same set of circumstances.
So while certain stocks may drop in price in reaction to a particular event, others may rise or be unaffected and thus limit any losses or even allow you to make a profit.
Try to avoid the temptation to sell during momentary market dips. The stock market is full of peaks and troughs, and it may be smarter to hold your nerve (and stocks) and ride out any short-term falls to gain long-term profits.
Golden rules for stock trading
Do your research
Diversify your portfolio
Don't panic
Jargon buster
A bear market is a market environment where a major index or stock falls 20% or more from its recent highs. It’s the opposite of a bull market.
Blue-chip stocks are the stocks of large, industry-leading companies, typically with good reputations. The term was derived from blue gambling chips, the highest-valued chips in casinos.
A firm or person who executes your buy and sell orders for stocks or other securities. Some brokers also provide advisory services.
A bull market is the opposite of a bear market and is a market experiencing a prolonged period of increasing stock prices that are at least 20% above a recent low.
Day trading is the practice of buying and selling a stock or security within the same trading day, often with the intention of profiting from small fluctuations in price.
An Initial Public Offering (IPO) is the first sale or offering of a stock by a company to the public.
A collection of assets that makes up a trader or investor’s portfolio. Your portfolio can contain a single stock or an infinite number of stocks and other securities.
A stop-loss order directs a stockbroker or share trader to sell a stock when it reaches a predetermined price. It is usually used by investors who want to limit their potential losses on a particular share.
Volatility can either refer to an individual stock's price movements or the movements of a financial index. Stocks that fluctuate wildly in price over a short period of time are considered highly volatile, while those that move slowly are deemed less volatile.
FAQs
You can start online trading by opening an online stock trading account. Once the account is opened, transfer the amount of money you plan to trade into the account. Once in place, that money can be used to buy and sell shares.
In terms of how much money you need for stock trading, it's not as much as you might think. Some online trading platforms will let you invest as little as £25 a month. You could start by setting aside a few hundred pounds for trading, then gradually increase how much you invest as you improve your knowledge and gain better insights into the market. As your profits grow, so too can your investments, but remember there are no guarantees, and your investments can go down as well as up.
Online stock trading is safe and secure if you use a regulated stock trading platform. But that doesn't take away from the fact that stock trading is an inherently risky activity. That’s why you should not trade with more money than you are willing to lose. It’s also important to educate yourself about trading by reading books and news articles to increase your knowledge.
Yes, you can buy a single share of stock. In addition to buying just one share of stock, you can also purchase a piece of a single share – in other words, fractions of shares.
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