If you want to trade stocks, London is the place for you. The London Stock Exchange (LSE) was set up in 1801 and is now one of the largest stock exchanges in the world.
To give yourself a good chance of success, you need to understand certain things before delving into trading on this particular stock exchange. The first thing is that there are two separate markets: AIM and the ‘main’ or ‘full’ market.
To trade these stocks as a beginner, you must understand how they work so you can best pick out the ones that suit you and your portfolio.
AIM
To trade AIM stocks, you need to be aware of what they are and their pros and cons: they’re often small companies with relatively high growth potential and, as such, can present significant high risk and reward opportunities.
However, this does not mean that those on the entire market are without risk either. Some of them have been listed for many years but have had a bumpy ride over those years.
To trade these stocks as a beginner trader, you must understand how they work so you can pick out the best ones for your portfolio.
LSE
The LSE is divided into three categories: listed companies, those that have the complete listing and then the AIM.
The main criteria for a company to be accepted on the primary market are showing clear and continuing growth potential. It must be able to meet all of its ongoing obligations, such as submitting audited accounts or appointing directors.
It’s essential to look at how long a company has been here and at their sector – some, such as mining companies, can carry more risk than others, such as farming.
Know the timeline
When you want to trade stocks in London, you need to know how long they’ve been going because this tells you whether they will be moving up or dropping down.
When it comes to how much growth potential a company has, you need to look for those with at least 100 employees and must also publish accounts as this helps to tell you whether they’re reliable or not.
If the figures don’t reflect what’s happening now, then watch out because they can turn out wrong in future too.
Several other factors might influence your decision when trading stocks in London: If there is any recent bad news about a company, it could make them a good buy.
Conversely, if someone important leaves a company or makes an investment in another one, this may also affect the stock price.
It’s better to wait until all of the excitement dies down before buying.
When trading stocks in London, you’ll find it’s best to wait for the dust to settle before making your decision because this gives you a better idea of what is happening.
Remember, these are just guidelines and not rules, so don’t feel tied down by them – there are no guarantees in trading.
In conclusion
Once you’ve decided which company looks good for growth, please take note of how much it has increased or decreased since its initial IPO because that will give you an idea of whether the share price will go up or down in future.
If it’s gone down, then this could be your chance to buy in at a discounted rate but make sure you do plenty of research first.
The growth potential isn’t always reflected in the level of risk, though – some small companies may have a high turnover but only keep a small amount of the money for themselves.
So although they may be a good buy, you need to make sure they can continue expanding without worrying about whether they’ll have enough money.
When trading stocks in London, it’s excellent if you think the company is going places but don’t forget that companies must balance growth with making a profit – it gets tricky if there isn’t enough revenue coming in.
Link to buy shares online for more info.
