An Introduction to Stock Trading Part 6 - Buying Shares

Ok so you have read all of the guides so far and now want to buy shares, so how do you go about it?

Firstly use the Metrics, Terms and Dividends information to select your target. Check for any impending Corporate Actions and work out which Types of Accounts are suitable for your circumstances. When you have identified the security (company) you want to invest in go to your brokers website to make your deal.

For this demonstration I will be using my iWeb ISA account as it has a simplified web interface - I am in no way endorsing iWeb and I myself actually hold accounts with several companies so be sure to look around and make sure you get the account that is best for your personal circumstances.

Access your account and make sure you have sufficient money deposited to cover your deal, it is important to also work out how much Stamp Duty and Commission you will be liable as this will reduce the amount you can purchase.

Step 1: Go to the Trade screen, Most trade screens will have the fields below available although they will be laid out differently.

 

Enter either the Ticker symbol or the company name, Below I have used LLOY for the Lloyds Banking Group. Make sure that you are getting the correct shares. Normally you will be looking for Ordinary Shares (ORD) but some companies (Such as Shell) have two different types of Share A&B and they behave differently so make sure you put in the correct Ticker.

 

 After you have the correct Share listed decide if you want to purchase an amount of Shares or a certain value of shares, Remember if you are buying a number of shares then the amount you pay may be different to what you expect. if You choose Value of shares then you will need to enter the amount you want to spend, including commission and stamp duty.

When you have the amount selected click on dealing quote (Or similar) and you will be moved to a confirmation screen - It is very important to know that the confirmation screen is Time Sensitive, You will be given an amount of time (Normally 15 seconds) to confirm or reject the deal this is because the deal is being held open on the exchange. The screen should show the amount you are spending on shares (Here called the consideration), the amount you are paying in Commission, the amount of Stamp Duty and if applicable (On deals of over £10,000) the PTM Levy.

After this screen you will get a receipt showing all of these details which you should keep as this will be used for calculating if you are liable for any Capital Gains Tax.

I am not showing this screen here as, whilst I am happy to try and write up as much as I know about share trading I'm not going to buy shares just to show you what it looks like :-) So at this point I pressed Cancel.

The other option that was available on the trading screen was Set trade Plan, this may be written differently on different accounts but normally consists of Limit Orders and Range Orders.

A Limit Order can be either a Buy or a Sell and simply consists of your limit that can be set in advance. For example if I set up a Buy Limit for Lloyds above at 80p then the deal wouldn't have gone through unless the price of Lloyds dropped below the 80p mark at which point the deal would have gone through. It is important to note that this is the price that the deal is triggered, if you set a buy order at 80p but the shares drop to 70p then you will get the shares at a lower amount, if the shares drop to 80p but are immediately increased to 81p then you will not get the deal as the system is still tied to it's ability to action the deal which is sometimes just not long enough. This is especially important on a sell when you can set a Sell order if the shares drop below 80p but if they drop straight from 80p to 40p then your sell will be at the 40p mark.

A Range order is where you can add multiple Limit Orders on one account, so for Lloyds for example I could set a Buy Limit at 80p with a Sell Target of 100p this means I can then (In theory) leave it alone and as long as the share price drops below 80p before surging to over 100p I will return at a later date to find myself 20% (Less fees and taxes) better off.