Stock market: how to buy or sell shares? – Income

If you are starting out in the stock market, you first need to open a securities account or a PEA (Equity Savings Plan) in order to buy shares (shares in a company’s capital). This from an authorized intermediary of your choice: bank, stockbroker, Caisse d’Épargne, La Banque Postale, online broker. You must sign a “securities account agreement” with a professional specifying all brokerage fees. It also informs you about the options for sending your stock orders: by telephone with subsequent written confirmation or fax (pay attention to the times that must be respected for your orders to be taken into account) or via the Internet.

Once the stock orders are placed, the broker will send you a “transaction notification”. It also keeps all movements in your stock portfolio up to date and at the end of the year sends tax forms with the amount of sales made and dividends collected.

What you need to know before investing in the stock market

Investing in the stock market is a risky financial investment that can cause sharp declines. Unlike Livret A or Euro funds, the capital is not guaranteed when buying shares directly. While the winnings can be high, you can also lose your entire deposit.

Placing your capital in the financial markets can only be considered in va medium-term outlook, at least five years. And you shouldn’t put all your eggs in one basket. It is better to adopt a diversified strategy by mixing, for example, income, cyclical, growth stocks (companies able to regularly increase their profits) from different sectors of activity.

This may take a while. If you don’t have it, you can opt for financial instruments such as trackers (or ETF) or funds AND pee (SKIPCP). In some cases, they also offer access to foreign markets at lower costs.

Instead of investing directly in the stock market, buying an ETF allows you to replicate the performance of a stock market index, such as the CAC 40. Leverage trackers are also available to individuals. Handle with care when using.

It is better than taking positions in the financial markets determine your investor profile and the strategy you plan to follow in managing your portfolio.

Securities Account or PEA?

PEA is the preferred tax envelope if you do not plan to invest in the stock market in “exotic” securities (especially outside the European Union).

This is because the taxation of securities held through PEA is favorable after five years of holding. A limitation that is not really there because the stock market is an investment that is medium to long term.

If you want to invest in mid caps, you can also open PEA-PME.

Individuals can also invest in the stock market (but with difficulty directly) through multi-support life insurance contracts by subscribing to funds or unit trusts (UCITS).

Priority rules

All buy and sell orders entering the EuronextParis computer (order book) are classified by price limit and at each limit chronologically as they are recorded (the so-called “market sheet”).

Thus, the computer system works according to two criteria:

  • Price: a buy order with a higher price limit is delivered before all stock orders denominated at lower limits. Sell ​​orders with the lowest price limit are executed before those marked at higher prices.
  • Weather : when two orders of the same direction and with the same price limit arrive, they are executed in the order of their arrival.

In order to enter the book, the stock order must be entered correctly. By placing an electronic order over the Internet, you reduce the risk of error or human misinterpretation and can have the transaction completed immediately.

Otherwise, with the written order, provide all the data necessary for its proper execution: your securities account number, the direction of the operation (buying or selling), the place of quotation of the security (Euronext Paris, New York…) , Isin or a mnemonic code that identifies the value , the amount of target securities, the type of order and its validity period (day, date or “revocation”).

Different types of orders to buy shares in the stock market

“limit” order (most used). It consists in setting a ceiling buying price (the maximum level above which you refuse to buy) or a minimum selling price (the minimum level below which you do not sell). The design is subject to sufficient consideration.

The “best limit” ranking. It will turn into a limit order based on the best demand at the time it hits the market. For illiquid securities (with a low trading volume), you risk only partial execution. In this case, the outstanding balance will remain at the original price.

“Market” order. This request takes precedence over the “best limit” and “limit price” requests registered at that time. It consists of collecting the available amount of titles by submitting as many limits as needed. Where appropriate, the price for the unexecuted quantity is “reserved”, i.e. suspended (marked “MO” on the quote, meaning market order). This is the closest “current price” buy order with immediate execution.

Order of “triggers”. Also called a “stop” order consists of setting a purchase price, a threshold below which the operation cannot be executed (or a sell limit above which the sale cannot be executed). This order with a trigger (max or min) allows you to protect against a possible trend reversal and limit your loss if necessary. Example: To preserve your capital gain on a security purchased at 45 euros and currently trading at 64.10 euros, you can place a trigger sell order at 62.05 euros (specify expiration date). If the price falls to 62.05 or below, the order will be executed.

“Launch range” order. It is equivalent to a stop order, but its execution will be within the price range. Thus, a buy order with a trigger range of “21.50 limited 22” will ensure execution for the investor if the price exceeds 21.50 euros without committing you to more than 22 euros in the event of a market rally.

Note down. The “all or nothing” and the “at any cost” orders no longer exist since November 2003.

How to buy shares in the stock market in summary

The stock order must be sent in writing, transmitted by telephone or via the Internet. To effectively respond to opportunities and reduce the risk of errors, prioritize modern transmission technologies.

Ask competing brokers about order execution fees and portfolio custody fees.

Check the terms of orders on other exchanges around the world. Also discover our article to understand how to use SRD (Deferred Settlement Service) to invest in the stock market.

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