How to Trade Stocks

Trading stocks, or equities, can be a great way to diversify your investment portfolio, earn a return on your investment and grow your wealth. If you are interested in getting started, it’s important to understand the basics of how the stock market works and build an understanding of the different strategies you can use to trade stocks. 

First, it is important to understand that when you buy a stock, you’re buying a small piece of ownership in a company. The value of your stock will fluctuate based on a variety of factors, including the company’s financial performance, market conditions, and investor sentiment.

Stock Trading Strategies

Buy and Hold Strategy

One of the most popular strategies to employ is the buy and hold strategy. The buy and hold strategy involves buying stocks and then holding onto them for the long-term, this looks to take advantage of increases in the stock’s price as well as any dividends paid. This strategy can be effective if you conduct research and find companies that have strong fundamentals and are likely to grow over time.  

Dividends will play a large part when employing this strategy. Dividends are a payment made by a company to its shareholders, typically on a quarterly or annual basis. They are usually paid out in cash but can also be paid in the form of additional shares of stock. They are typically a sign that a company is financially stable and has a strong cash flow. 

In terms of stock ownership, when a company pays dividends, the shareholders of the company will receive a portion of the dividends based on the number of shares they own. For example, if a company pays a dividend of 10p per share and an individual owns 1000 shares, they will receive £100 in dividends.  

Additionally, dividends can also be used as a metric for evaluating a company’s performance and potential for growth, which can be useful for investors and financial analysts in their research, and in turn, can affect the company’s stock price.

Day Trading

Day trading is a popular strategy that involves buying and selling financial instruments, such as stocks, options, currencies and commodities, within the same trading day. Day trading can often be a high-risk strategy and requires research, knowledge and experience to be successful. Day traders need to be able to quickly analyse market conditions and make responsive decisions based on the information available.

How to Choose the Correct Broker

When you are choosing a broker to trade stocks, it is important to consider the following factors to find the best UK stock brokers:  

• Fees and commissions: Compare the fees and commissions charged by different brokers. Some brokers charge a flat fee per trade while others charge a percentage of the trade value. Look for a broker that charges reasonable fees and commissions that are in line with industry standards and offer the service you need. Always remember, the cheapest broker is not always the best option. If you are trading for free the broker is receiving a payment from somewhere else which may not always have your best interest in mind.  

• Investment options: Consider the types of investments offered by the broker. Some brokers specialise in certain types of investments, such as stocks, while others offer a broader range of investment options, such as bonds, futures and options. Make sure the broker offers the investment options that are in line with your investment goals. OptionsDesk offer multi currency accounts that allow you to trade multiple products such as, stocks, options, futures and bonds. 

• Research and tools: Look for a broker that offers a wide range of research and tools to help you make informed investment decisions. Educating yourself is incredibly important and having a broker that supplies educational content, explained in plain English and is easy to follow is worth its weight in gold. At OptionsDesk we have experienced professional brokers ready to help you with the markets and your investment journey.  

• Customer service: Consider the level of customer service provided by the broker. Look for a broker that can be contacted when you need them. Nothing is worse than being stuck in a conversation with a chatbot when issues arise, or the market is moving against you. It is also important to keep in mind the broker’s hours of operation and to make sure you can reach them when you need to. 

• Regulation and security: Look for a broker that is regulated by the Financial Conduct Authority (FCA), or your local regulator, to ensure that your investment is protected and that it has the correct measures in place to protect your personal and financial information. OptionsDesk is regulated by the FCA and all client cash and positions are segregated.

Ultimately, the most important factor is to choose a reputable and reliable broker that aligns with your investment goals and preferences. 

At OptionsDesk, we take onboarding seriously and we require that you complete an application process to help us with your financial situation and investing experience. This information is important as it allows us to identify if the products offered are appropriate for you as per the guidance of our financial regulator, the FCA.  

Once your account is open, OptionsDesk can discuss your investment objectives with you and after you’ve selected the equities you would like to purchase, or alternatively have transferred in an existing portfolio, an OptionsDesk broker will do the rest for you. 

At OptionsDesk we make sure what we charge you for our service is transparent and clear, with no hidden fees. We take our duty of best execution extremely seriously and do not make money from the difference (or ‘spread’) between the bid and offer.  

Here at OptionsDesk all orders are executed on regulated stock markets and derivative exchanges. Because these trading venues are obligated to offer ‘best execution’,  you get the best possible price for your order. 

Trading equities can be a great way to grow your wealth, but it’s important to understand the basics and your investment horizon. With the right knowledge and a good broker, you can navigate the stock market, buy equities that meet your investment goals by positioning yourself for both capital appreciation and dividend income.