How To Start Investing In Stock Markets
Reading time: 6 minutes
This clear and concise guide on how to start investing in stock markets will present various important topics related to investing in stock markets. Learn how to open an investing account, how to choose the best stocks and investments that work for you, how to perform market orders, how to implement limit orders and more!
Select Your Preferred Stocks
Once registering and funding your brokerage account, you then begin the process of selecting stocks. A good place to begin is researching companies you know as a consumer. The endless stream of data, along with real-time market movements may overwhelm you initially, so keep it simple by looking for companies that you want to part own.
One of the greatest investors of all time, Warren Buffett, once said, "Buy into a company because you want to own it, not because you want the stock to go up". Starting with the company's annual report, the management's annual letter to shareholders can provide a decent general narrative of how the company is performing, and what its future plans are.
In addition, analytical tools that you need to evaluate for the business will be available on your broker's website, such as recent news, conference call transcripts, quarterly earnings updates, and any company lodgements with the regulator. Many brokers also provide articles and tutorials or seminars on how to use their tools, and how to select stocks.
Make a Decision
You should begin share trading and investing with small investments, perhaps even starting with a small purchase to get a feel of owning listed company stocks, and this will help you to understand whether you have the patience or not to absorb minor losses for longer term gains without stress and sleep deprivation. You can always increase position sizes as you become more comfortable with such investments.
When entering a Market Order, you are either buying or selling the stock at the next best available market price. As a market order places no price parameters, your order will be executed immediately, and usually fully filled with small orders; unless you're trying to purchase a large parcel of shares, e.g. millions of dollars worth of shares.
With Market Orders, the price you pay or receive, if you're selling, may not be the exact price you were quoted only seconds prior; this is because Bid and Ask prices fluctuate constantly throughout the day. Market orders are best used when buying or selling stocks that don't experience wide price swings intra-day — E.g. for the large blue-chip stocks, rather than smaller, more volatile companies.
- A market order is best for buy-and-hold investors, where they don't care about small differences in prices, but rather, ensuring that the trade is fully executed.
- Place a market order when the markets have closed for the day, then your order will be triggered at the price when the exchanges next open.
- Checking your broker's trade execution disclaimer is a good idea, some low-cost brokers bundle all customer trade requests at a prevailing price, whether at the end of the trading day, or a specific time or day of the week.
If you prefer more control over the price of trading, then using Limit Orders are better. For instance, let's assume that Apple is trading at $100 a share, but you think $95 per-share is more in line with your valuation. Your limit order tells your broker to wait and execute when the ask price drops to that level.
Alternatively, a "sell" limit order tells your broker to trade the shares once the bid rises your price level set. Limit orders can be great for investors buying and selling smaller company stocks, as they may have wider spreads, depending on investor activity. It is also useful during short-term stock market volatility, or when the stock price is more important than the fulfillment.
Additional conditions that affect limit orders are:
- AON - An 'AON' (All Or None) order will be executed only if all the shares you wish to trade are available at your pre determined price limit.
- GFD - A 'GFD' (Good For Day) order will usually expire at the end of the trading day, even if the order has not been fulfilled.
- GTC - A 'GTC' (Good Till Cancelled) order will remain in play until the trader has cancelled it, or the order itself expires.
The limit order guarantees that a trader will get the price they want, however, the order itself might not get filled. Limit orders are usually placed on an FC-FS (first-come, first-served basis), and only after market orders are filled. Moreover, the stock should remain within the predetermined parameters that you have set long enough for your broker to execute that particular trade. Limit orders might cost traders and investors commissions.
The commission that is paid with limit orders might require more than the commissions from market orders. Bear in mind that a limit order that can't be fulfilled at one time, or during a single trading day, might be filled in the course of subsequent days. Transaction costs will usually be charged each time a day trade is made. If the stock never gets to your limit level by the time it expires, the trade will not be executed.
How To Open And Set Up Your Investment Portfolio With Admiral Markets
- Open a Admiral.Markets trading account
- For MetaTrader 4 (MT4): select Admiral.Markets
- For MetaTrader 5 (MT5): select Admiral.MT5 or Admiral.Invest
- Select your stocks
- Seek companies with strong long-term growth prospects
- Decide how many shares to buy. Base this on your budget and desired allocation
- Choose your order type. Use "market" or "limit" in most cases
Please note, stocks are available for investment with Admiral Markets through the MT5 Admiral.Invest account only, all other Admiral Markets trading accounts offer CFD trading only. If you're interested in the prospect of trading with thousands of stocks and ETFs on 15 of the world's largest stock exchanges, Admiral Markets' investing account is the perfect option for you! Trade with an award-winning, fully regulated broker that offers access to FREE real-time market data, premium market analysis tools, low transaction commiissions, and so much more. Open your account today by clicking the banner below!
This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.