It could be argued that the rise in prominence of ‘online share dealing accounts’ has made trade sharing both easier and cheaper for everyone. The market now offers private investors a number of different shares account options of which they can trade through.

This article will cover the fundamentals of trading shares and online share dealing, in order to provide readers with a balanced summary of these topics.

Trading Shares: The Basics

In essence when you are buying shares, you are buying a small part of a company listed publicly on the Stock Exchange.

The amount of the company that you own is dependent on the number of shares you purchase. For example, if 200 shares are available and you buy 20, you will obtain a 10% stake in the company.

People tend to invest in shares as a means of making money. As you are buying yourself a stake in the business, the value of your shares is likely to increase if the business grows.

Other share options pay out dividends; sums of money paid out to shareholders based on the company’s profit. Dividends can provide a good source of additional income however they tend to be of relatively small amounts.

Most shareholders make profit by selling their shares on for higher prices than they purchased them for.

Obviously, trading shares is not without its risks; share prices can fall as easily as they rise. There is also no guarantee that the company you invest in will make profits. Therefore it is important to ensure that thorough research is executed and that you keep an eye on your shares and the market. Moreover, it is important to realize that you could lose some or all of your capital and you may not get back everything you put in.

Keeping your shares in an online account can be a good method of organizing and managing the process effectively.

Online Share Dealing

Online share dealing accounts are becoming one of the most popular options. They are very easily accessible and comprehensive to use meaning that all share dealing is completed through a central hub. It also makes the process easily manageable as all trades are carefully recorded and administered through the account.

For those who are just starting out with share trading, you can opt for an advisory account where you are in control of your trades but advice, guidance and recommendations are provided as necessary for experts in the field.

As for those with stock trading knowledge, an execution-only account may be better suited. These offer no advice or guidance, just a location for you to trade efficiently. Because of this, they tend to be the cheaper option with a low flat-fee charged per trade.

One of the key advantages of online share dealing is the speed factor as share trading often requires the need to act quickly. Having said this, most online share dealing accounts can also be accessed by telephone for the more traditional method.

Trading Fees

Keep in mind that trading penny stock often involves an extra charge or at least a different fee structure. So don’t just look at a broker’s basic structure and fees; specifically look for how they handles penny stock trades. In some cases, you won’t see penny stocks identified. You might also see them referred to as micro cap stocks or nano stocks.

However, you can still identify how a broker handles penny stock trades by spotting trades with the Pink Sheets and the OTCBB (Over-the-Counter Bulletin Board). You may also see different charges for stocks under a $5 per share, which usually indicates a penny stock fee.

Will you be day trading? If so, to trade on margin be prepared to pony up a $25,000 starting balance. This is enforced by the SEC (Securities and Exchange Commission), so if you find a broker willing to skirt this rule, run fast the other way.

Discount

Discount brokers will offer lower fees and less of a discrepancy between standard trades and penny trades. Quality discount brokers include services like E*Trade, Zedo, Low Trade and Choice Trade. Don’t expect a lot of help from these services. Some of them provide great tools and resources (like E*Trade), but you have to utilize them yourself. Despite the allure of low fees, I urge you to only move to a discount service once you’ve gained significant skill and experience in this industry.

Brokers Who Offer Both Discount and Full Service

Some full-service broker’s kind of ride the line between being full-service brokerages and discount brokers. What this means is that they offer inexpensive trades (though maybe not quite as cheap as some true discount brokers) but also more expensive service for investors who desire greater assistance and service. Brokers like this include ING’s Share Builder and TDAmeritrade.

Full-Service

Then you have true full-service brokers. If you’re new to investing, I encourage you to stomach the extra expense of working with a full-service broker as you learn the ropes. Vanguard, Fidelity and Charles Schwab are quality examples in this category. These brokerage firms will offer you guidance and hands-on assistance in determining your investment strategy. If you dream of working entirely on your own and you desperately want to avoid high fees, I still encourage you to start with a full service broker to build a solid foundation of experience and knowledge.

1) Trade only in ‘paid for’ positions and avoid margin trading. This is very important because it can make you have a calculated risk of the amount money that you can loss. So, it will not happen that you end up losing a lot of money that you have to pay back for the marginal trading.

2) Only trade stock that have good management experiences and have ‘net asset value’ plus in the sectors that are rising. It is because this kind of stocks has the potential of growing high steadily.

3) Put all your eggs in one basket, then ‘watch the basket’. This means focus on one sector at one time and monitors it. It will make you specialize trading on that particular sector that make you lucrative profit.

4) Diversify exclusively within the sector you are interested in. You will be happier and motivate to study and understand the particular sector that can make your money eventually. So, do not put more than 10% of your available capital into one stock as your goal on your portfolio grows.

5) Do not looking at your stocks too regular. Discipline yourself to ride out the minor ‘ups and downs’, they are part of the game. This important to avoid your emotional being affected by it.

6) Do paper trading first for those beginners until you can make a steady profit from trading the stock market.

7) Set a stop lost for your stock trading by telling the system when to sell out your stock if its price drops to a particular price. This is to minimize your losses.

8) Before you follow the advice of an analyst, check out his or her record. Keep track of their advice, to see how accurate they are. Look at previous newsletters in the archived section for guidance.

Besides the above actions that you should take into consideration, you can improve your stock trading skills by having more practices because it can make you lucrative profits from the stock market.