What are the different methods that currently exist for buying stock market shares directly online?
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.
The knowledge necessary for buying stock market shares directly online:
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:
- Firstly, it is of course necessary to know the stock markets well and understand their general function and operation. The stock markets are a complex world which uses specific terms that you need to understand, as well as rules that you need to master.
- You will then need to know the assets in which you wish to invest, in this case the stock market shares. A thorough knowledge of the stock market asset is required with above all a full knowledge of the issuing company. In fact, depending on the asset, the company or the activity sector, stock market shares can vary in their volatility and react to a differing extent to certain factors or have a different risk level.
- In the same way, it is necessary to know the required procedure for ordering online. The stock market investment platforms on the internet are generally considered to be user friendly and fairly simple to use but a certain knowledge of the tools and functions they provide is necessary if you wish to create and successfully use a trading strategy to make profits.
- This brings us to another type of knowledge that is necessary for buying and selling shares on the stock market and which concerns this time a certain strategic knowledge. Stock market investments are obviously not a game and require clear and precise methodology. Shares are not to be bought on a whim or through intuition but because you believe in their strength, based on analytical data, your capacity for belief in a company and its products, or a company’s ability to pay dividends.
- Finally, it is clear that you will need to possess a certain degree of knowledge regarding analytical methods. As we shall examine later, two types of analyses are particularly popular with investors that buy and sell shares online through the stock markets, these are the technical and fundamental analyses.
How does a technical analysis function with the purchase of stock market shares online?
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.
How does a fundamental analysis function relative to the purchase of stock market shares online?
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.
Where and how can you find stock market shares that can be bought online?
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.