Stock trading is buying and selling stocks, or securities, in the stock market. To trade stocks, you will need to have a broker. A stockbroker is someone who buys and sells stocks on your behalf. You can either use a traditional stockbroker or an online broker.
The amount of money that traders need to start trading stocks will depend on the type of stock they want to buy, the price, and the broker they use. For example, if you want to buy shares in a company listed on the London Stock Exchange (LSE), you will need at least £500 in your account. However, if you are using an online broker, they may have different requirements.
What are the various fees to consider when trading stocks?
Brokerage fee
When you trade stocks, you will need to pay a brokerage fee. The broker charges this fee for their services. The fee will be determined by the type of stock you buy and sell and the broker you use. For example, if you buy shares in a company listed on the LSE, you may be charged a brokerage fee of £10. However, if you are using an online broker, they may charge a lower fee.
Stamp duty
You will also need to pay stamp duty when you buy shares in a company listed on the LSE. Stamp duty is a tax the government charges on purchasing shares. The amount of stamp duty you will need will depend on the value of the shares you buy. For example, if you buy £10,000 worth of shares, you will need to pay £100 in stamp duty.
Commission
When you sell your shares, your broker may also charge a fee. This fee is called a commission. The amount of the commission will depend on the type of stock you are selling and the broker you use. For example, if you sell shares in a company listed on the LSE, you may be charged a commission of £10. However, if you are using an online broker, they may charge a lower fee.
Capital gains tax
You will also need to pay capital gains tax on any profits you make from selling your shares. Capital gains tax is a tax that is levied on the profits you make from selling assets such as shares, property, and investments. The amount of capital gains tax you will need to pay will depend on your tax bracket. For example, if you are in the 20% tax bracket, you will need to pay 20% of your profits in capital gains tax.
All these fees will vary and depend on the stock you’re trading and the broker you have chosen.
How to minimise costs when trading stocks
Use an online broker
If you want to minimise your costs when trading stocks, you should use an online broker. Online brokers typically charge lower fees than traditional stockbrokers. They also offer various features to help you save money on your trades. For example, some online brokers offer commission-free trades, meaning you will not be charged a fee when you buy or sell shares.
Use a discount broker
Another way to minimise your costs when trading stocks is to use a discount broker; they offer lower fees than traditional stockbrokers. They also offer various features to help you save money on your trades. For example, some discount brokers offer commission-free trades. You will not be charged a fee when you buy or sell shares.
Use a limit order
When you place an order to buy or sell shares, you can specify the price at which you want to buy or sell the shares. It is called a limit order. You will only pay the specified price for the shares if you use a limit order. It can help you save money on your trade.
Use a stop-loss order
A stop-loss order is an order that is placed to sell shares at a specific price. The broker will sell your shares if the share price falls below the specified price. It can help you minimise your losses if the share price falls.
Visit the Saxo website to check out stocks available for trading for UK clients and set up your account today.
