Trading stocks and shares is considered by many as
being suitable for those who wish to adopt a longer term strategy
to their investments and not really suited to those wishing to
trade for the short and even medium term. This is mainly due the
time that it takes to process deals and for the issuance of share
certificates as, unlike CFD trading or Spread Betting,
when trading with a stockbroker you are giving instructions to go
and buy the physical underlying share and will take ownership of
the shares once the deal has been executed on the exchange.
Remember you can't sell something you don't own so unlike some
other forms of trading you can't sell a share without owning it
which makes share trading only really suitable for those investors
who are looking to go long or buy shares.
Many stock broking firms will offer their clients, for a
slightly increased dealing cost, an advisory service that provides
potentially valuable trade recommendations for shares across all
sectors. As with any service of this kind the extra premium paid
for placing the deal can only be considered value for money if the
information you receive proves profitable. If you intend to
use a stock
broker to assist in your trading decisions it is important
to research the company you intend to use and to speak and
preferably meet with your account manager so you can explain your
trading ambitions and appetite for risk. There are hundreds of
stock tipping services all of which will claim to return fantastic
levels against your initial deposit but just as with other forms of
trading there is no magic formula for picking a share that will
perform well for you. Spend time researching the stock or sector
you are interested in and look at historical charts to gain a
better feeling for the level of volatility you can expect when
trading as this will leave you better positioned to make a decision
about your risk appetite for each trade.
Stock traders tend to be followers of fundamental rather than
technical analysis although there are an increasing number of
chartists who have turned their attention to trading individual
stocks. The main problem with using technical analysis for stock
trading is that you often find large gaps in the charts where share
prices have a closing price from the previous day that is markedly
different from the next day's opening price. This is because stock
markets do not offer 24 hour trading and so announcements from
companies before or after the trading bell can result in
considerable price changes once the stock re-opens for
trading.
If you are keen to learn more about how to use both technical
and fundamental analysis there are a number of excellent training
courses that are provided by various education companies around the
country. As with choosing your stock broker it is important to read
more about the courses on offer to ensure you find the right one,
at the right price, that is going to teach you at your pace and not
become too advanced too quickly. One of the greatest mistakes made
by new traders is trying to understand every aspect of trading
rather than focusing on the basics and ensuring a full
understanding of them before moving on to other more complex
strategies.