Trading shares online is a relatively easy, inexpensive way for individuals to gain access to the wonderful world of stock market trading. It can deliver great returns but many investors are not confident enough to "go-it-alone".
In the past, information on stocks was available only to brokers and investors had to call a broker and pay higher brokerages when buying or selling stocks. But thanks to the internet, information on stocks is now widely available to the public and investors are able to take control of their own investments.
Gerhard Lampen, head of Sanlam iTrade, Sanlam?s online trading offering, says an investor can be successful at online trading whether she or he is a beginner or financially savvy. He advises novice investors and the more experienced to take note of the following three tips to help them make the best use of the information available to succeed at "DIY" online trading.
- Knowledge is power
Lampen says investors should equip themselves with as much information as possible about the companies they are investing in. "This information is available in many forms; investors should read as much as they can about the companies they are interested in as well as about the markets and economy."
Lampen says information is available from the media, investment books and the Sanlam iTrade website, which has a section filled with research reports from its in-house portfolio managers.
"To succeed in online trading investors should question everyone and everything, so pay attention to other traders? recommendations, analyse all incoming information concerning online trading, make conclusions and pick out useful information which will help you to succeed.
"Live SENS news actually gives online traders and investors an advantage over investors with stockbrokers on the telephone," says Lampen. All sensitive news that can affect share prices must be released on the JSE?s SENS news first. This includes items like trading updates, company results, directors resigning, mergers, etc.
"Because Sanlam iTrade provides its clients with live SENS news, our clients will see the breaking news at exactly the same time as stockbrokers. By the time the stockbroker has phoned his biggest client, thousands of our clients could already have traded to take advantage of the news."
- Use analysis smartly
There are two forms of price performance analysis for investors: technical and fundamental. Technical analysis involves analysing shares by looking for patterns in past prices and volumes. Lampen says this form of analysis is best suited to the short term investor because it assumes all info is in the price and gives insights into short term price movements.
However, he says, for the longer term investor this does not give the full picture. "A combination of fundamental analysis ? which examines factors such as the company?s balance sheet and earnings growth to give you a long term view on a company?s performance ? and technical analysis, which will show if a stock is expensive or not, should be combined in order to give longer term investors the complete picture so they can make informed investment decisions."
Lampen says that educational material on technical and fundamental analysis is available from the Sanlam iTrade website to help investors get started. Lampen says technical analysis is a very important skill to learn. "Understanding technical analysis will give the charts some meaning and help investors understand why certain price movements occurred."
Fundamental analysis is done by examining company reporting and other documentation.