Starting to Trade Stocks


Q.: Can I start trading with £100?

A: NO!! Putting £100 is very unrealistic. CFDs aren't for you with that sort of capital and I doubt any firm will let you open an account, they would I think require a minimum, don't know how much but I'd want at least £5k if I were the broker.

But I will resist the urge to say 'take it out and spend it'. £100 in a CFD account with £10 each way to trade is for crying out loud. You should open a free demo CFD practice account and get into real trading only when you have a few thousands to start with (I recommend minimum of £5000).

 

Q.: I was thinking about making a small initial investment (say £200) to pursue shares trading on a daily basis?


I do, of course completely understand that it's gambling and could go either way so plan to re-invest what I earn from it to make it more of a hobby and should the shit hit the fan, I won't be out-of-pocket. I also understand that this unlikely to be a rich-quick scheme and I estimate that I will have about 30 min or so a day to carry out my market research/trading.

A: Honestly, £200 is too small an amount to start with. Assuming you are going to pay about £10 to make a round-trade straightaway (i.e. buy and sell immediately) you would already need to be at least 10% ahead to breakeven - and that's putting it all on one stock. You might find it demoralising to discover the putting in a lot of work doesn't end up giving you any reward.

I would suggest not buying securities in less than 500 pound tranches and maybe even 1000 pounds. I do understand your worry about losing sizable amounts of monies but you need to consider trading costs. For CFD trading on equities, most CFD firms will have a minimum commission for each trade, usually about 10 pounds which is obviously too much for a 200 quid account. Some firms remove the minimum if you deposit more (have a premium account etc) which might be worth considering if you insist on trading shares through CFDs. You might need to deposit say 5000 quid but then you can just risk 500 and therefore you'll only pay 10bp with no minimum. Commodities tend to have larger % spreads. Indices might be worth a look as lower % spreads.

As I've already stressed £200 is very small an amount for daily trading and sure there is a remote possibility that you will buy something that multiplies 10 fold within a year but the odds are very much against that. If you still want to have a try, don't put it into more than one share as your money will just end up disappearing in dealing commissions. Just research one good company and stick to that until you have more money to split up (hopefully!).

Alternatively you might want to consider financial spread betting (I'd recommend IG Index for this) which doesn't have any commission (the costs are built in the spread therefore no minimum). As for CFDs if £200 is all you can afford to lose then margin products don't have any place in your portfolio.


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