Home Stocks Trading, how to trade on stocks online

Stocks Trading, how to trade on stocks online

On our site you’ll find plenty of daily analysis to help you trade stocks online, as well as numerous articles dedicated to individual stocks on which to trade with company information, market forecasts, and tips for trading. Depending on the type of transaction you choose and your preferred sector, you can undertake a riskier but potentially more profitable investment path, as well as a quieter path with lower profits and less risk. A good intermediate solution lies in a fair diversification of your portfolio and in the use of risk management tools, which we will discuss in this article. Before starting, it is necessary to detail the tools that allow you to negotiate on online shares, using a simple internet connection from any desktop or mobile device. Below is a table with the best stock trading platforms.

Stocks you can trade online

It should be noted that all the platforms listed here are perfectly regulated, operate in compliance with EU laws.

The authorities guarantee certain levels of transparency and security, but for the trader other factors are just as important, such as convenience for example. In fact, a stock trading platform should offer conditions that are, if not entirely advantageous, at least not penalize the trader, who in the long run may feel the weight of the number of trades completed. For this reason it is important that brokers offer competitive spreads, if not for all instruments, at least for those that the user wishes to trade. The spread for stock trading is certainly a good test field for testing the convenience of a broker.

All the platforms we have included in the table do not charge commissions on orders executed, so they are much cheaper than traditional brokerage fees levied by investment institutions. Profits for these brokers are defined by a small percentage of the spread, applied to the opening of a position. In this regard, the spread is applied only to CFDs, and not to binary options. When trading shares with CFDs you get results in proportion to the changes in the stock’s prices, while with binary options you look for a fixed percentage profit in case of positive outcome of the up or down forecast.

Trading stocks online, information and advice

Among the various ways of earning profits on the performance of a stock on the stock exchange, in addition to investing through a brokerage agency, is the opportunity to trade shares with CFDs (Contracts for Difference). CFDs are special financial instruments that present several advantages we will hereby highlight.

First of all, they allow you to trade online for shares without actually owning them, so they are much more practical than stocks that entail more bureaucracy and commission costs.

The second and most important advantage is they offer margins. Equity trading with CFDs allows you to move large amounts of securities, while still binding small amounts of capital, much smaller than those required to move the underlying shares. For example, with leverage of 1:20, you can move shares worth 1000 euro with only 50 euro. The trader therefore binds a small fee, called an “initial margin” which is returned at the close of the position net of profit or losses.

With regard to trading on shares with binary options, the elements described above no longer apply. In fact, if you decide to trade on options, you will simply have to predict if the stock at a given maturity will be above or below the starting level (in “call/put” options) or in a certain interval (in “range options”) .

If you don’t know what to choose between CFDs and binary options, here is our advice: try both choices with a free demo. In doing so, you can actually understand which of the two modes is more akin to your style and experience level. Generally, CFDs are aimed at those who have more “hands on” experience, while binary options are also available to those with very little experience. However, there are always exceptions to every rule.

Brokerage through traditional brokers

If you have substantial funds and prefer to buy and sell shares instead of CFDs, you could turn to a broker to act as an intermediary between you and the different stock exchanges. The role of the intermediary is to execute trades on your behalf and their costs depends on the type of service requested.

If you need a broker that, in addition to brokerage, also provides consulting services and planning an investment strategy, then you will need to contact a “full service broker”. Obviously the commission costs for these brokers are very high. If you are only interested in consulting, with advice and recommendations but without final decisions, you could contact a “broker advisors”. Finally, if you simply want straight-up brokers, who only deal with the execution of orders, you could contact an “execution-only broker”. In this case, commissions will be minimal and generally in line with the market.

Buying shares, managing risk

Purchasing shares, as well as stock trading, being assets that depend on the performance of financial markets, are exposed to risk when said markets move in the opposite direction to their forecasts. Stock price movements can follow trends, be slow, fast, or even worse still sudden. In such cases, excellent profits can be obtained but also substantial losses can be incurred.

Today, fortunately, stock trading platforms have very practical and easy to use risk management functions. Regardless of your knowledge of English, we recommend you become familiar with the terms “Stop Loss” and “Take Profit”.

  • Stop Loss is a function that allows you to set a maximum percentage level of loss taken into account for any single operation. For example, by opening an upward position on Unicredit shares, a Stop Loss order could be set which automatically closes the position if the drop exceeds a certain level. This level can be decided freely, regardless of whether it is up or down. This function is fundamental, since if, on the contrary, an open position were left without having set a Stop Loss, any very penalizing market movements would have a great impact on the capital available on the trading account.
  • Take Profit is a function that allows you to turn a profit. Taking the same previous case as an example, if after opening an upward position on Unicredit shares a profit set with a “Limit Order” was reached, the platform would automatically close the position. This function is also very important because it allows you to take advantage of sudden changes, if well forecast.

The most advanced stock trading platforms such as Plus500, offer super intelligent and innovative features including Operational Stop. This type of stop has been a real revolution in CFD trading as it allows you to automatically change a Stop Loss and Take profit level if the market moves in favour of the trader. For example, if you start from a level of 50 and set a Stop Loss at 48 (therefore 2 points below), the addition of an operational stop would move the Stop Loss to 49 if the initial level reaches 51. In the same way, if the market continues to move favourably, it could continue without any problems. For example, if the level reaches 60, the Stop Loss would become 58, resulting in considerable profits for the trader, despite the defensive setting.

Platform for trading on Plus500 shares

When it comes to shares, one has to mention Plus500 as it is the largest CFD provider in the world, with almost 3000 stocks available, including around 2000 shares. Plus500 offers access to hundreds of American, European, and Asian stocks too. It therefore allows you access to the most important stock markets including Wall Street in New York, Frankfurt, London, Paris, Milan, Madrid, Hong Kong, and many others.

The main strengths of this platform are its great ease of use, combined with great technology accessible to all. In fact, all the most important functions, such as the placement of purchase/sale orders, stop losses, limit orders, and operational stops, are easy to use. At the same time, more advanced features such as the application of graphical indicators for technical analysis are easy to apply and are fully automated. For these reasons, the Plus500 platform is excellent for those just starting to trade, as well as authoritative for those who already have experience and want practical use.

On our site you’ll find free access to a full CFD course, which will allow those who wish to learn or deepen their knowledge to start practicing with step by step instructions.

To better appreciate the CFD course, very useful for trading purposes, we recommend opening a free account on Plus500 and practicing with its demo mode, equally free and infinitely effective to improve your trading skills.

Equity trading for everyone: portfolio diversification

Another factor to consider for proper and effective diversification of your portfolio is given by the choice of industry sectors you invest in. If you want to invest or trade in numerous stocks, it would be inadvisable to have a portfolio of shares from a single sector, such as the auto sector. If you invest in or trade in FCA, Volkswagen, Porsche, Renault, General Motors, and the likes, a crash in the auto sector could jeopardize your entire investment. Instead, a portfolio that includes more sectors would be safer, especially when there are shares in particularly volatile sectors, such as banks and energy companies, in your portfolio.

Until a well-balanced equity portfolio is diversified, it is advisable to focus on a few, but well-known stocks. In this case, to “know a title” means the knowledge of the industry sector, of the factors that can push it upward or downward, the company’s balance sheets, planning for the future, possible changes in its corporate structure (mergers, capital increases, etc.). The more you know a company, the more effective you will be trading its shares.