Shares are one of the most popular markets today and are a magnet for all trades. So whether you’re a starting trader, an experienced investor, a small trader, or a big trader, shares are a trade to consider!
This trade is also called equity or stock trading. So basically how this works is, as a trader/investor, you buy and sell shares or stocks in public companies. These transactions are done through stock exchanges. Stock exchanges are a platform where both buyers and sellers do deals and sort out transactions.
So if you’re just starting your journey in shares, it’s crucial to know how to efficiently buy and sell. So to help you out a bit, below are all the basics of how to buy and sell in shares trading:
How do you buy shares?
A popular approach to participate in the stock market and acquire ownership of a publicly listed firm is by purchasing company shares. So to help you better understand how buying shares really goes, here is a step-by-step rundown:
Step 1: Do your research
Before anything else, it’s essential to really know the trade you’re getting into. So start off by educating yourself about shares. Things like how its market works, knowing the popular companies, knowing about industry trends, keeping taps on news and events and so on.
Step 2: Choose a broker
After step 1, you’ll also know popular and reliable brokers to consider. This step is where you choose a broker to buy and sell shares through. There are actually two main types of brokers such as traditional brokers and online brokers. Each of these has the same objective BUT carries pretty big differences, so depending on what suits you best, here’s a rundown of each one to help you pick:
- Traditional Full-Service Brokers – These come with a comprehensive variety of services and personalised assistance, but their prices are frequently higher.
- Online Discount Brokers – These platforms enable online share purchases and offer cheaper costs. They are well-liked by independent investors.
But before choosing either one, make sure you’re picking out a good broker! A good one will have qualities such as:
- Regulated and reliable.
- Offers low costs.
- Has excellent execution speed.
- Offer a wide range of tradable assets.
- Has great research and analysis tools.
- Is user-friendly.
- Has great customer service.
- Offers educational resources.
- Has risk management tools.
- Offers a demo account option.
- Has a mobile app.
Step 3: Open an account
Once you’ve chosen a broker to consider, it’s time to open an account! This step will only require you to provide any necessary information needed to open a brokerage account such as identification and any probable financial information.
Step 4: Deposit funds into your account
Next is to put some money into your account. The money deposited will be used to buy shares. For this step, you can simply transfer/wire funds from your bank account into your brokerage account.
Step 5: Place an order!
Register for a brokerage account, then place a buy order for shares. Market orders (purchase at the current market value) and limit orders (buy at a specific price or better) are two examples of the various types of orders. Select the kind based on what you’re looking for.
How do you sell shares?
Selling shares, which may be carried out via your brokerage account, is the act of getting rid of your ownership in a corporation. Here is a step-by-step guide on how to do just that:
Step 1: Log into your brokerage account
Since all share transactions are done through your broker, this is the first step! Utilise the web tool or mobile application that your selected broker provides to access your brokerage account. Once you’re logged in, you’re ready for the next step.
Step 2: Pick out a stock to sell & select an order type
Now it’s time to pick out the stock you want to sell. In your portfolio is where the list of stocks you have. So head over to your portfolio folder and choose the stock you want to sell.
Step 3: Specify the number of shares you want to sell
Now tell your broker how many shares you wish to sell. You can either indicate a partial quantity or sell all of your shares in that business (a complete sale). Once that’s done it’s now time to place an order. Just like buying, there are also order types for selling and here are the two to consider:
- Market Order – With this order type, the shares are sold at the going rate, and the deal is completed as quickly as practicable.
- Limit order – You can specify a particular price when you wish to sell your shares by using a limit order. The order won’t be carried out unless the stock price hits that level or above.
Step 4: Specify a time frame
You can also set the order’s execution time with some brokers. There are two common time frames used by traders and these are the day order and the GTC order. To better understand each one, here is a rundown:
- Day Order – Only the current trading day is covered by this order. It expires if not used by the end of the day.
- GTC Order – This order is known as the Good ‘Til Canceled Order. How this works is, until it is executed or you cancel it, a good ’til cancelled (GTC) order is still in effect.
Step 5: Review your order then confirm
Before clicking away make sure to review your order to make sure everything is accurate. So double-check your order details: stock symbol, number of shares and order type.
Step 6: Execute the trade!
The broker will carry out the sell order once you provide your approval. The shares will be traded at the current market price if the order is a market order. If the order is a limit order, shares will be sold if the stock price hits or exceeds the set price.
Now you know the basics of buying and selling shares, you won’t have to ask yourself how to trade shares effectively ever again! Knowing the basics before getting into the nitty gritty complexities of trading is essential and ideal, especially if you’re new to trading or trading in general.