With the advance of the internet and the development of online services, investment in the stock markets has also grown strongly and now it is possible to buy and sell shares on the stock markets online. In this article we shall take a close look at this growing practise and the different ways of investing in the stock markets online. We will also take a few moments to examine how this has attracted new investors and the knowledge required to be able to benefit from the financial markets in an autonomous manner.
A very important choice of value with stocks selected from the securities that make up the major international stock market indices is also one of the advantages of this type of investment because it allows you to speculate on values that interest you and for which you have enough information.
Finally, equity trading makes it possible to diversify your investments very effectively by investing simultaneously in several securities from various sectors.
Initially we shall examine the different methods for buying and selling shares on the stock markets online. With the digitalisation of the financial markets, the quotation of asset prices and rates are no longer completed on the physical markets but are managed in an electronic or digital manner. This has made it possible to access the markets using a computer and has enabled the development of this activity remotely.
Among the methods available for buying shares online there are financial placements products available through online banks and even some traditional banks. By opening certain accounts with these online banks or brokers such as an investment plan, an equity savings account or even a life insurance policy, it is now possible to buy shares on the stock markets from numerous quoted companies to constitute a stock market portfolio. The objective here being generally to receive dividends as company shareholders and maybe to sell the shares later to recover the capital. These placement products, although managed by banks, still however present a certain risk level for the savings capital.
Another way of investing in the stock markets is by using the derived financial products available through specialised brokers. The most common are the brokers that offer CFDs, also known as Contracts for the Difference, as well as trackers and options. These contracts are not recommended for individuals or beginners though as they are purely speculative in nature. In fact these were not created to be bought and added to a share portfolio but simply for speculative purposes by taking a rising or falling position on a particular share price.
Whatever the method used by the trader, buying or selling shares online requires a certain experience and a solid knowledge of the market.
It should be remembered here the risk represented by investing in the stock markets. The stock markets are unpredictable by nature and there is no certain method to be sure of generating profits. Also, by investing money in these markets, either online or elsewhere, it is still possible to lose part or all of your capital very quickly. This is why it is extremely important that you have a certain experience and knowledge of these markets before you start trading and this is what we shall assist you with now:
As we have just noted, one of the two types of analyses generally used by investors online is the technical analysis. This analysis method has become highly popular and has strongly developed over recent years through the development of the internet together with communications and information technologies.
It is important to remember here what in fact this form of analysis consists of. As indicated by its name this analysis could be described as a mathematical and statistical analysis of a stock market share price. It is in fact based on an examination of the asset price from a historical point of view or a particular timeline using technical ‘indicators’ that enable the calculation of certain probabilities such as those pertaining to trend, volatility or market fluidity. But it should also be remembered here that any method, however refined and detailed, does not enable you to be 100% certain how and when a stock market share price will change or move.
A technical analysis therefore uses certain chart indicators that correspond with methods implemented by the analysts or economists specialised in the study of stock markets. Among the best known indicators we find for example the MACD indicator, the moving averages, the technical support and resistance levels, the pivot points, the Bollinger Bands as well as the Fibonacci lines.
We offer you the opportunity to consult more detailed articles relating to these indicators. In fact even though it is no longer necessary for you to complete the calculations that enable you to obtain these indicators or even track them on charts yourself it is important that you understand this method of calculation and particularly know how to interpret these indicators. Nowadays it is software integrated in the stock market charts online that effect these calculations in a digital and automatic manner that is displayed directly on these charts on your monitor and updated in real time. But it is above all the interpretation of this data and these indicators, their comparison and combination with other fundamental indicators that enable you to try and predict the future performance of a share price on the stock markets.
The technical analysis is therefore a method that requires particular knowledge and some skills such as a certain mathematical logic.
Now that we have explained a technical analysis relative to stock market shares, we will examine the second type of popular analysis used by online investors, the fundamental analysis.
As we have just noted, this second form of analysis differs vastly from the first in that this is not at all a mathematical type of analysis and does not take into account the share price or its movements. In fact, a fundamental analysis is based uniquely on a study of the factors that could exert an influence on the stock market share price and therefore on the health and growth of the issuing company.
Numerous types of data can be used here; some of them are particular to each business or activity sector and others can be more common. For example, concerning the fundamental data that we find for all shares we can note the financial results with the annual balance sheet and the intermediary results published quarterly. Generally speaking these are published regularly on the official company websites together with the company’s fixed objectives and predictions for the coming months and years with their strategic plans.
For all the companies quoted a segmental analysis of the competitors could also be completed in order to also take into account the factors that influence a company’s activities.
However other factors are unique to each business and this is why it is necessary to fully understand the company in which you plan to invest. Frequently the analysts follow all the news and events of the company concerned and try to identify the major events that could persuade investors to buy or sell these assets. This could relate for example to the cessation of the company’s activities or, to the contrary, a merger or the creation of a joint venture with another company or a significant acquisition. This could also concern a litigation case, a scandal or a change in management or implementation of a major partnership or alliance or another significant event that could cause a slowdown or boost the performance of the company concerned.
There again, it is not enough to be simply be able to find the factors you need to study for this fundamental analysis, you will also need to be able to interpret them correctly according to other indicators such as the market conditions, analysts’ predictions and the technical data.
It should in fact be remembered here that this analysis should always be compared with the technical analysis in order to confirm or adjust the signals obtained and ensure that the trend results from the two analyses at least go in the same direction.
Once an investor has gained enough experience and knowledge to buy shares online they still need to know which assets to invest in. And for this of course you will need to know which stock market shares can be bought online.
In a general manner, the choice of stock market shares in which it is possible to invest in online depends on the product or service in which you choose to invest. In fact, certain financial placement products only allow you to access specific markets according to the type of business quoted or a certain geographical zone. Some are limited to the European market whereas others also include companies from the international markets and others enable you to invest in start-ups and SMEs.
Concerning the market of derived products from the online brokers, they generally concentrate on the shares quoted on the large stock market indices such as the CAC 40, the FTSE 100 or international indices such as the Dow Jones or the Nasdaq. The choice of assets in which you can complete buy or sell transactions is therefore important and up to each person to give preference to the shares that interest them.
However, as we explained earlier, the choice of shares to buy depends on your knowledge of these assets and an understanding on how these prices could be influenced. This is why this investment should be completed only after achieving a clear insight and knowledge as well as experience of the market.
Luckily certain websites also enable you to deepen your understanding and knowledge, for example on our website you can notably read detailed articles on the major companies quoted on the large stock market indices worldwide and learn all the basic information you need before deciding to analyse and track them or not.
To summarise, buying shares online is nowadays possible but is generally reserved for those with experience as it requires a certain knowledge and precise strategy that can only be acquired over time and with perseverance.
The shares that would be best for you to buy actually depend on the type of trading that you wish to practise. If you wish to buy the shares for a yield strategy you will probably prefer the shares of companies that have an attractive dividend payment policy. If you plan to resell your shares rapidly to achieve a plus value then you would probably prefer shares that display a high volatility with marked trends that are of course rising in price on the market.
With Contracts for the Difference, or CFDs, you don’t in fact actually buy the shares so you are not the actual owner of the shares you invest in. You simply take a buying position on the share price. This buying position enables you to benefit from the difference between the price at the opening and the closing of your position if the price has risen.
If you plan to buy shares on the stock markets then you need to know what you are doing. It is recommended that you make this purchase when the share price is low or in the run up to a long rising trend if you wish to sell your shares later at a higher price. You could also buy shares in a company that increases its payment rate to shareholders every year and thereby benefit from advantageous dividends over time.
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