What Is Stock Trading?

First, however, before listing the best stockbrokers in UK out there and why, it is good to know exactly what trading in the stock market is and how to invest in stocks. In doing so, it can help you target what your own specific needs and requirements are from your stockbroker as a consequence to pick one that is most suitable for you. 

A stock or share is a small fraction of a company. Stock trading is the practice of buying and selling shares or stocks on a stock exchange. In doing so, you can follow any range of investment strategies and building up a portfolio of shares. 

Types Of Stock Investment Strategies

Investors employ different types of investment strategies to try to ‘beat the market’ to make healthy returns on their initial outlay. In the majority of the below, gains can be magnified or losses can be aggravated by leverage. 

Long

A long investment strategy is one where an investor buys shares with the intention of holding them for a long time. They can do this over a broad range of stocks and shares, all on which they have done investment research. That investment research will have highlighted that the stocks are currently undervalued and there will be a belief that they will rise in price over the long term. This can also be known as value investing.

Short 

A short investment strategy is one where an investor seeks to make returns in the immediate investment horizon by exploiting near term fluctuations in the market. Often, investors will do so by implementing a technique called short selling, where they actually sell a stock they do not own and purchasing that stock at a later date to settle the deal with the party with whom they short sold. This can also be known as a type of momentum investment strategy. 

Dividend Growth 

Some stocks and shares can earn dividends which is another way that investors can grow their money. Dividends are a payment to shareholders by a company on a regular basis. They are not a guarantee however, nor is the amount always known before buying a share of a company initially. That being said, dividend paying companies have been seen, historically, to be more stable and often try to increase their dividends regularly. Investors can then reinvest those dividends to help compound their return. 

Contrarian

As the name suggests, contrarian investing means to go against what the general consensus is. In doing so, it looks to make large gains from incorrect pricing in the market, but that pricing is often caused by a recession or other large market force. Contrarian investors can often make money when bubbles burst, like the dotcom bubble for example. That bubble saw some tech companies grow almost exponentially in value, with very little in terms of robust fundamentals behind them. The bubble burst, and the contrarian investors who sold at the top of the market will have stood to have made a lot of cash. 

How To Choose A Stockbroker?

There are many elements to consider when choosing the stockbroker for you. Perhaps of utmost importance in this day and age is to double check their online capabilities and portal. Ensure that you can access your portfolio information with ease through your stockbroker’s software, but also that you can understand it fully. 

Know what you want to trade and how

Depending on your investment strategy and what exactly you want to trade, some stockbrokers may be more suitable than others. Research your prospective stockbrokers to see whether their software is capable of implementing your short investment strategy or your contrarian approach to investing. 

Know where you want to trade

Knowing where the markets are that you want to trade in can have a big impact on what stockbroker you end up choosing. Not all stockbrokers will be able to trade in every exchange in every country. 

Know their deposit minimum

Some of the deposit minimums to set up an account with a stockbroker will be so high that you are immediately precluded from using their services. Ensure you know what your potential stockbroker stipulates therefore in terms of initial deposits and whether you can match that. 

Know their account opening process

It sounds silly, but so many would-be stockbrokers out there fall down on the most basic, practical matters. It can be hugely discouraging to use a stockbroker, only to find that they have an onerous application process that takes a long time to go through. In a day and age where so much of our lives are increasingly digital, we often feel that setting up an account with a company should be instantaneous. However, some stockbroking firms take a number of days to verify accounts. If you want to start trading immediately, this is a huge drawback.

The Best Stockbrokers - Key Takeaways

Choosing the right stockbroker for your needs is essential to running your portfolio. The fees that stockbrokers set vary in terms of structure and amount which can have a big impact on your bottom line, depending on how and what you trade. Additionally, the software that a stockbroker provides its users with is also a key tool to helping manage your portfolio. When the software is well organized, intuitive and user friendly, customers are more likely to be able to make the right trades that suit their strategy.