Trading in foreign shares is one of the most exciting ways to invest your money. It’s also one of the riskiest, as you won’t have any control over how much profit or loss you’ll experience. But if you do it right, trading foreign shares can be a great way to diversify your portfolio!
1. Set Up a Brokerage Account
- You’re going to need a brokerage account, which you can use to make trades online.
- You can set up your brokerage account through an online broker or with a stockbroker at a brokerage firm.
- There are many different types of brokerage accounts that vary in cost and features. Consider your trading shares goals before deciding on the right one for you.
- With most brokerages, there is no charge for signing up—but there often is some kind of commission fee when buying or selling stocks within the account (known as trading fees).
2. Fund Your Account
Before you can begin trading abroad, you will need to have sufficient funds in your account. The amount of cash you need is determined by the broker and varies from broker to broker. As a general rule, however, it’s important that you have enough in your account to cover at least one large trade or at least 200 smaller trades (depending on which size fits your trading style).
The amount of money required for a particular trade depends on several factors: whether or not there is any commission due on the trade (some brokers charge commissions for opening and closing positions), what currency pair is being traded (some pairs require only half as much money as others) and how frequently the trader trades.
3. Research Potential Stock Investments
To be successful, you must do your research. You are investing money into a company and its stock. Therefore, you need to know everything about the company before buying any shares of it.
The first step is to research the company itself. SoFi’s experts recommend, “Look at its financial reports, business model and history, valuation ratios and market capitalization (the total value of all shares).” This will give you an idea of how well it performs and whether or not it is likely to survive long-term as an investment option for yourself or others who invest in this stock as well.
4. Understand the Currency Exchange Rate
The exchange rate is the price of one currency in terms of another. These are important for traders because they affect the price of their trades. You need to understand how the exchange rate affects your ability to profit from a trade.
5. Place a Trade
Once you’ve done your research and found a company that you think might be worth investing in, it’s time to place your first trade. To do so, open up the trading platform of any reputable broker (you can find a list of recommended brokers on Investopedia). Once opened, you’ll see an array of different options. Select “Trade” from this menu and then go through the steps necessary to execute your order by providing information such as:
- The number of shares or contracts you want to buy or sell
- The price at which those shares should be bought or sold
- Whether or not you want those shares delivered immediately after purchase (this is known as an “instant trade”)
Hope this article helped you understand the basics of trading foreign shares. Make sure that you research the share properly and weigh its pros and cons before making the investment.
