If you are new to share trading, putting the pieces together can be quite challenging in determining where to start and how the whole share trading system works. The following steps may point beginners in a right direction. However, bear to mind that this is not legal advice. Use this information at your own risk.
Where to start in share trading?
To start trading on Australian stock market (ASX), you need an online trading account with a broker (e.g., ComSec or eTrade), a cash management account that is linked to this account, a minimum $ 500 for the initial purchase, and some common sense.
If you happen to be already with Commonwealth bank, it make sense to setup a trading account with ComSec. This can be done online, but requires printing out the forms and sending them to the bank manually, in order to verify your signature and other details. The bank will then email you your login details and post the share trading account terms and conditions.
Once you are able to login, you will need to transfer some funds to the cash management account connected to ComSec. You will need to check what is the minimum trading amount and brokerage fee – this information is available on their website.
What share stock to buy?
There are two ways to invest. Invest long into blue chip companies (large stable corporations) or invest short into start-ups or smaller companies.
If you are prepared to wait and prefer to avoid risk, investing in blue chip companies may be a better option. Your stock will not grow fast, but it will grow. The goal here is to get a better return than you would normally get from keeping your cash in a high interest bank account.
However, if you are keen to really test out high return investment possibilities, investing in a least known companies may do the trick. In the current economic environment there are many companies with share price below 1 cent. If the share price goes up to 1 or 2 cents, it means that you’ll get 100-200% return on your investment. And if often happens in one day.
What to look out for?
Your online share trading account will provide you with real time share prices and historical data for listed companies. Before investing in a specific company it is suggested to collect sufficient amount of data suggesting immediate price growth or at least, price growth in the near future.
There are some indicators that normally suggest that:
First, it is suggested to review historical graphs. It is absolutely paramount to establish a high probability that the company is able to deliver better results in the near future. It is important to check what level the share price got to in the past and then research what company actually did during that time.
Second, it is suggested to review the company’s past and recent stock market announcement. ASX listed companies are obliged to disclose all information that affects the share price. These include various financial statement, annual reports and operational and exploration plans and results. Compare the graphs to the stock market announcements. Once you determine a pattern, all you’ll need to do is to wait for a similar announcement, invest right away and they see if the company behaves the same way it did in the past.