A Virgin Trader

Normal traders don’t apply stop losses!

I have just opened a normal trading account with ‘Interactive Investor‘ (www.iii.co.uk). They sell themselves on the platform of being completely transparent with their charges. However, as I found out to my frustration hidden charges do exist.

If you open an ordinary trading account it says:

• £10 commission for real-time UK trades
• £15 commission for US and European trades
• £1.50 for regular trades
• No inactivity or subscription fees
• No ISA or other administration fees
• Phone trading at no extra cost

What they don’t mention, is that the most basic of trading tools a ’stop loss’ is classed as not part of a normal trade. If you want to use a stop loss – and who in their right mind would not, it is an extra charge.

Unfortunately this only becomes apparent after you have made your first deal and try to apply a ’stop loss’ to it. It is only then that you find it is not available unless you open a ‘TradePlan’.

When I rang the Interactive Investor trading team to ask why I could not apply a ’stop loss’ they said it is not seen as a normal part of trading.

Just another part of the virgintrader learning curve I’m afraid. I would recommend opening an account with another broker for example share.co.uk at least they have stop losses as a normal part of the deal, at no extra charge.

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Tags: Hidden Charges, Interactive Investor, share trading tips

This week I setup a couple of dummy/paper trading accounts. Can’t afford to risk the real spondoolies just yet. Paper trading or “virtual stock trading” as I have also seen it called is perfect for the virgin trader, it gives you the chance to test out the markets, pick some stock, do some research, play with stop losses, all without risking any real money.
Just like monopoly really, except instead of buying property you’re investing in stock. Paper accounts are easy to setup and behave just like a real live trading account. A practice/paper account is an easy, risk-free way to improve your investment skills. Usually online paper accounts give you:

• A start up fund, say £10,000 of fantasy money so you can practice playing the market
• Functionality that’s designed to work as closely as possible to a real share dealing account, not just a watch list.
• Access to tips and advice to help you get started and improve your investment skills
• Free research tools so you can learn more about the market

A paper account lets you:

• Pick stocks, buy and sell within your paper account based on current market prices
• Check out different strategies and considerations
• Set up and try stop-loss and tracking stop-loss limits to see how they work
• Set up watch lists

There are plenty of online brokers offering paper accounts and usually for free. If it is not for free find one that is.

I have setup paper account with www.share.co.uk. This was real easy no complicated forms to fill in and the user interface is very intuitive. I also set up a paper account via the FT (Financial Times) this is great and I would definitely recommend it to any virgin trader.

Here is how to set one up. Go to:

http://www.ft.com/sitemap

Then scroll down the page and select ‘portfolio’ from the ’services and tools’ section. From there you will be asked to register (it is free) and the rest in pretty simple really.

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Tags: share trading tips

There are loads of online brokers to choose from offering a whole host of different sorts of trading products, but beware, choose your weapon carefully. As a virgin share trader like myself, I would suggest a basic share dealing account and a self-selecting ISA account. Plain and simple. Leave the more exciting and dangerous trading activities for further down the road to market trading wisdom.

There are two main types of broker: ‘advisory‘ and ‘execution only‘ brokers. As the names suggest an advisory broker will give you advice on what stocks to acquire and sell, an execution only broker gives you no advice but will execute the buy and sell order on your behalf. I chose the ‘execution only’ route for my share-trading journey.

At first glance they all seemed to offer the same sort of service, the only real difference was price. However beware! It is important to check for any hidden costs. Several had trade commission offers, but on closer inspection these depended on a minimum number trades per quarter.

Most of the brokers I came across had annual management fees, and account inactivity charges.  Dealing fees were usually between £10.00 and £12.50 per trade whether it is a buy or a sell. There is also stamp duty to pay on trades at (0.5%).

A couple of online brokers had sign up deals such as ‘your first 10 trades free‘, but as we all know, or should, free does not infact mean free at all. Free usually means until we get your direct debit setup and start sucking the money from your account then what a surprise it is not free anymore.

E*TRADE were particularly expensive on additional hidden extras. Although the dealing fees were £11.50 they also had management charges, inactivity fees, as well as minimum monthly trade allocations. It all adds up to an unnecessary overhead to have to cover on each trade just to break even. (www.etrade.co.uk)

The Share Centre was very reasonable at £7.50 per deal with no inactivity fee. They did have a £2.50 quarterly administration fee. (www.share.co.uk)

For example if you buy 500 shares of company A at £1.00, your costs for this deal would be:

Tags: Online Brokers, share trading tips

As a UK virgin share trader using an ISA (Individual Savings Account) as a trading umbrella makes a lot of sense as a good way to start your online trading journey.

A self-select ISA means you can invest in UK and international equities, collective funds such as unit trusts, investment trusts, corporate bond funds, OEICs (open-ended investment companies) and ETFs (exchange traded funds), gilts and cash, as well as warrants, covered warrants and CFDs (contracts for difference). Yes I know it sounds a handful but after a bit of jargon Googling you will have your head around it in no time. In fact I will explain what they are in a later post, once I find out myself.

Most online brokers offer ’self select’ trading ISA’s. This means that you can basically trade the money inside your self-select ISA without any capital gains tax liability or income tax on the profits. Very cool.  From what I have read on various broker sites it is very easy to setup and trade using an ISA umbrella. Most broker sites have an ISA signup button on the homepage. And if you shop around you should be able to find one that has no ISA administration fees or inactivity fees.

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Tags: Share trading for beginners, share trading tips