Want to buy stocks? In this article we look at the various ways that exist for buying and selling stocks. We take a look at buying and selling stocks at a traditional broker and trading in stocks through a CFD broker.
Ready to get started?
- Open a free account at Plus500 > : you get unlimited practice with a free demo account!
- Read the free eBook: Earn your first 500 pounds trading.
- Buy and sell famous UK & USA stocks.
The best way to buy CFD shares
Years ago buying and selling stocks was a cumbersome affair. To buy and sell stocks you often had to physically go to a bank, which charged very high transaction costs. Fortunately, this is no longer necessary!
Nowadays, via an online broker it is possible to trade all well-known CFD stocks. With an online broker you can quickly buy or sell a CFD stock within minutes. The best broker for stock trading is currently Plus500; with this broker you can include trading in all known and unknown CFD shares of different countries.
Did you already know this about stocks?
- You can buy and sell CFD stocks with as little as 100 pounds.
- When trading CFD stocks you can use leverage and thereby achieve better results.
- You can speculate on falling prices by going short.
- Now you can use orders to open trades a a certain price.
The software of Plus500 is perfect for buying and selling stocks. Click here to open an account >>
How to buy stocks?
Long term: slow and conservative
A lot of people buy stocks for long-term purposes; you can do this with a securities account. There are a range of providers from whom you can buy stocks. A lot of people use banks for this purpose. Banks offer special accounts that you can use to buy stocks. Providers such as Alex, Lynx and Binckbank however, are better alternatives for buying stocks long-term, because the costs of an order are much lower.
Short term trading
When you want to make a profit by trading CFD stocks on the short term you can use a CFD broker. CFD brokers are pretty new and offer a lot of benefits compared to the more traditional providers of security accounts. A big downside of traditional trading is that you need a lot of money to make a lot of money. The fees are very high and always have a minimum of multiple pounds, making trading with 100 or 1,000 pounds simply unattractive. If you make the wrong decision, you can of course lose money as well.
Trading stock using CFDs
You can trade stocks using CFDs. With CFD brokers you pay a low fee that is dependent upon the size of your order. The costs start at a few pence, meaning you can also trade with relatively small amounts.
Trading stock CFDs also has other benefits. You can use leverage to increase your results. However, it is important to remember that losses are also magnified using leverage. CFDs are contracts that stipulate an underlying value where the difference between the price you open and close a position determines your profit or loss. Because you never actually own any stock, you can simply trade using all kinds of financial instruments, including index funds, commodities or currency pairs.
Example: buy CFD Apple stock
Imagine the price of Apple stock is 586 dollars, and you decide to buy a stock through CFD trading. You deposit 1,000 pounds into your account with your broker and you decide to buy four stocks. The total amount of your purchase is 4 x 586 dollars, a total of 2,344 dollars. When the price changes however, the profit or loss is settled with your account. The fees are one dollar per share, meaning the cost is four dollars, or 0.17 percent.
The price goes up that day by 20 dollars and you decide to close the position. With the stock you purchased from Apple, you made 4 x 20 dollars minus the transaction fees, which comes down to 76 dollars. Take this amount and exchange it for pounds and you’ve got your profit in pounds! These calculations will be done automatically by the broker, but this is a good illustration of the possibilities of trading stocks with a CFD broker.
Want to start CFD buying stocks?
Want to start buying and selling CFD stocks immediately? Look at our overview of demo accounts. You can start trading completely free and without any risks. Something to keep in mind is that you can always make a profit, because with CFD brokers you can short, meaning you can profit when the price goes down. That way, the downfall of a listed company can be a nice opportunity for you to make some extra cash.
What you should know before buying stocks
What are dividends?
When buying physical stocks you should take into account the importance of dividends. When a company makes a profit, the company may decide to distribute a portion of the profits to the shareholder in the form of dividends. When buying a good stock pay close attention to the dividend since this amount also determines the ultimate profit you will earn. Read here all about dividends.
What are stocks exactly?
A stock is a kind of document of ownership. If you own stock in a company, you are a co-owner of the company. You will therefore often be paid a share of the company’s profits in the form of dividends. Most people, however, also own stocks because they anticipate a change in price; This is also called market speculation Read here to learn more about stocks.
How do you determine when you should buy a stock?
When you want to be successful in trading CFD stocks it is important to time your trades well. It is important to take new developments into account; positive news often increases the price of stocks and negative news makes the price drop. In addition, it is also important to take technical analysis into account. Read more here about how to trade >>
Before you begin buying and selling, it is important to have adequate knowledge!