If you are interested in the stock market, you have probably wondered how to buy and sell shares. To trade stocks, there are some necessary steps that we will explain in this guide.
First of all, buying and selling shares should not be just a passion, but it’s necessary a thorough study of each stock you are aiming for to invest your money in shares.
A good financial education should be the basis of all forms of trading, therefore also in the currency market (Forex), commodities, cryptocurrencies and so on.
In this article we will see how to invest in shares and therefore how to buy and sell shares, in order to understand how it works.
How to buy shares?
To invest in shares and therefore to buy shares (or maybe to sell them) you need to contact a financial intermediary. It can be your bank or broker.
In the first case, you have three ways to be able to buy and sell shares, that is, to contact your bank by phone, in person or to access your online bank account. With the latter, you can basically trade online on shares.
By broker, we mainly mean two figures. The first one is a person, i.e. a financial advisor who is licensed to do this job. He will take commissions and often works with a bank or investment fund.
On our site or, in general, when we talk about online trading, when we hear about brokers we mean a financial brokerage company, i.e. a Forex / CFD broker, which allows the trader to be able to buy and sell shares (but not only) directly from home. In this case we are talking about buying shares and selling them online.
So before you can buy and sell stock market products, including investing in stocks, you need to choose the right financial intermediary. At Meteofinanza.com we have filled a list of the best Forex brokers that also allow trading on stocks. All these brokers are regulated and authorized.
Buying shares: what does it mean?
When you buy a stock, you are basically buying a slice of a publicly traded company. Investing in shares, therefore, means buying a part of a company in the belief (and hope) that the price of the shares will rise and therefore obtain a capital gain.
Once you buy a share you become a shareholder of the company and, with a good amount of shares, you may be entitled to attend the shareholders’ meetings and the right to vote.
When the company distributes the dividends, the owners of the shares of the company will receive the money. So, for those who intend to start a long-term strategy, it is important to evaluate the dividends and understand what is the amount you will receive in case of holding the shares.
Not all listed companies have dividends, the ones that do it are usually healthy and in good economic condition. Giving a dividend means distributing a part of the company’s profits to the shareholders, that is, to those who own a part of it.
The moment you sell a share, it means that you are selling your stake in that particular company. If you think that a stock can go down, you could opt for short selling.
In this way you can make a profit from the drop in the value of the shares on the stock exchange.
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Buying shares online
Buying and selling shares online basically means not having to go to a bank branch. So you don’t have to leave home, face daily traffic, search for parking and queue at your bank. All these drawbacks don’t exist in online trading.
Trading online is therefore more convenient even if you want to buy and sell shares on the same day. Going to the branch office could compromise your short-term strategy. If, on the other hand, you are a long-term investor, that is, if you intend to buy shares and keep them for a long time, even years, timeliness is not fundamental.
Buying and selling shares online is especially for those who have an intraday trading strategy, that is, those who intend to open and close a position on the stock market during the same day, therefore in a single stock market session.
Stock trading with CFDs
An alternative to the classic stock purchase are CFDs. With this financial instrument, the trader is not really owning the stock, but he is only betting on the rise or fall in the price. Since there is no physical asset, the trader can therefore equally buy or sell the share.
CFD stands for “Contract for Difference“.
With a long position the investor is buying shares, viceversa with a short position he’s selling shares.
Compared to traditional investments, buying and selling shares with CFDs is cheaper and you can take advantage of additional services. With CFDs, you can invest using leverage. It allows your investment to become higher, but how? We see it immediately with an example.
With a leverage of 5:1, an investment of € 100 would become € 500. The remaining 400 € are “loaned” by the broker, which takes them back at the end of the operation. To be able to open positions of this type, it is necessary to have sufficient financial resources, that is, you need to have a margin.
Both profits and losses will be related to the investment that has undergone the leverage effect, therefore in our example € 500. Be careful, because the losses could eliminate the invested capital and become substantial. For this reason it is always advisable to insert a stop loss, which allows you to stop the losses before the exhaustion of the capital.
Timetables for buying shares
The stock exchange follows specific times and is not open 24 hours a day like Forex. Each stock exchange follows the times set by the national stock exchange. For example, the New York Stock Exchange (NYSE) opens trading at 3:30pm (Central European time) and closes it at 10:30pm. Oriental stock exchanges, such as the Tokyo (Nikkei) one, are open during the European night.
Notice that, compared to Fore,x the trading period on stocks is limited. With a good portfolio management and therefore diversifying investments, you can trade on the stock market for a long time.
In fact, the purchase of European, American and Asian shares in the same portfolio leads the trader to have an almost uninterrupted operation. The breaks aren’t that bad.
When a stock exchange is closed, as on the weekend, a trader can inquire in more detail about the shares that he owns, that he wants to buy, or that he wants to sell.
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In order to buy and sell shares, you need to contact a financial intermediary. This can be your bank or a broker.
When you buy a share, you are basically buying a slice of a publicly traded company. Investing in shares, therefore, means buying a part of a company in the belief (and hope) that the share price will rise and thus obtain a capital gain.
With this financial instrument, the trader is not really owning the stock, but he is only betting on the rise or fall in the price. Since there is no physical asset, the trader can therefore equally buy or sell the share.