Trading in physical stocks and shares is the
oldest and until quite recently the most widely used method of
trading the financial markets.
The oldest but still the most popular form of trading
Whilst the origins of share trading date back to the
12th century it is in the last 200 years that this
form of trading has grown in popularity. Most countries in the
world now have stock exchanges with one of the largest being here
in London. The London Stock Exchange (LSE) was started in 1801
in a place called Paternoster Square in the City of London, a site
that it has recently returned to having been previously
situated near to the Bank of England. The LSE is now ranked as the
fourth largest stock exchange by market capitalisation and sixth
largest in terms of trade volumes. An estimated 2 billion
pounds ' worth of trading passes through the exchange on a
daily basis with an increasing amount of trade now coming from
Physical or derivative trading?
The continued rise in popularity of CFD trading and spread
betting has seen a move by some investors away from traditional
share dealing but nevertheless this area still remains popular with
a generation who are perhaps slightly less familiar and comfortable
with derivative products and the world of leverage and online
Tip: Trading physical stocks is still one of the most
popular forms of speculating on the markets, especially for those
who are new to the market or are wary of the leveraged trading
products. One of the benefits of trading in this way is that
because you will always have to deposit the full value of the
contract you are trading you will always know your maximum downside
and will never be required to raise funds quickly to meet the
margin calls often received when using the leveraged products such
as Spread Betting and CFD's.
Service. Service. Service.
Most companies offering a stock trading service have been in the
City for a long period of time and are very well established and
recognised as offering high levels of service to their
clients. The majority of these companies operate differently
from the CFD and Spread Betting firms in that they offer a more
personalised service where you are allocated an account manager and
place orders via the telephone rather than across an online trading
platform. The costs for dealing this way are occasionally
higher than other forms of trading and the full amount of the
contract value is always placed with the stockbroker, in other
words they do not offer leveraged trading.
That said there are still a huge number of retail and
professional clients who choose to trade using a stock broker not
least because of the security of dealing with a trusted and
established business and the access clients receive to very
experienced market professionals.
Tip: This personalised
service offered by many stockbrokers isn't for everyone but with
other parts of the industry advertising speed of execution or
mobile solutions, it's a service that can be very welcome for those
who are new to the world of trading.
Costs to trade physical shares are reducing
The future growth of trading in stocks and shares in the retail
market will depend largely on how the derivative products such as
CFDs and Spread Bets continue to evolve.
At the moment is appears that the next generation of traders are
more likely to embrace the new world of trading online and across
mobile devices rather than opting for using the services of a
traditional stock broker. That said there does appear to be a
number of new firms who have chosen to offer traditional share
dealing but at much reduced commission levels for an execution only
service in an attempt to compete with the growing number of CFD and
spread betting companies.
Opening a trading account
Applying for an account with one of the more established
traditional stockbrokers is still likely to be a paper based
application process, whereas newer firms are choosing to provide
the option of online application forms. Clearly any online
application process is going to be faster than going the postal
route and the information required when completing both of these
forms are likely to be very similar.
Further resources on Share trading
Our comparison table below looks at a few of the criteria that
we believe are important to consider when choosing which stock
broker to use. If you would like us to find out any further
information about a broker listed here, or perhaps one that isn't,
please get in touch and we will be delighted to assist you.
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