Online share dealing

Online share dealing

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Centurion07

Original Poster:

10,381 posts

246 months

Tuesday 31st March 2015
quotequote all
I have a couple of questions that, although I've read the answers to, I'd just like to double-check with real people that actually know about these things. wink

So firstly, if I buy/sell, say £200K of shares in a company, through X-O.co.uk, are they ALL traded at the quoted price, or will they fulfil as much of that as possible at that price, and then fulfil the rest at a different price as and when they can? Seems a bit silly but I read that dependant on how many buyers/sellers there currently are can affect this. If that is the case, is there any way to tell what the current threshold would be to get 100% of the trade done at the quoted price? Is £200k a large enough amount to affect this or does it depend on the size of the company being traded or something else?

The bid/ask thing. If the difference is 2p, any shares I buy have to go up by 2p before I make a profit (less trading fees)?

Any other obvious things I should be aware of being a total noob to this? smile

nyt

1,803 posts

149 months

Tuesday 31st March 2015
quotequote all
If you're buying well traded shares then getting the price that's quoted shouldn't be a problem.
You can usually put put in a limit order which means that the purchase must be at that limit price or less.
The software usually tells you what you'll pay before you press the buy button.

If the bid-ask spread is 2p then the share will have to rise 2p before you break even (ignoring tax and two lots of dealing fees).

Different online dealers have different fees. Shop around.


It's always a good idea to run an imaginary portfolio for a while - see how you go. Some online dealers allow you to do this for free.


Centurion07

Original Poster:

10,381 posts

246 months

Tuesday 31st March 2015
quotequote all
Cheers.

What exactly is the relationship between the bid/ask spread and the actual share price as it seems to differ for each company?

Edited by Centurion07 on Tuesday 31st March 11:41

trashbat

6,005 posts

152 months

Tuesday 31st March 2015
quotequote all
Shares have a 'market size' - I think there might be a better term for this - which describes how many shares the broker/market maker is obliged to offer at a fixed price.

http://www.incademy.com/courses/how-shares-are-tra...

So for instance let's suppose it's 1,000. I ask to buy 1,000 shares, and they have to quote a price for those. If I want 10,000, however, they're not obliged to do that, and might reject my attempt or might give me a different, worse price.

Nonetheless in general when dealing you will be given a price which you have to accept/reject in a small time window (10 seconds), and what you see is what you get.

Sometimes they will decline to give you such a price, and offer to try and deal at the best market price, in which case you're effectively doing it blind. This might happen if you go above the market size as above, sometimes coupled with high activity at that time, or if you can't get live prices, e.g. foreign markets. Otherwise this is fairly rare.

trashbat

6,005 posts

152 months

Tuesday 31st March 2015
quotequote all
Centurion07 said:
Cheers.

What exactly is the relationship between the bid/ask spread and the actual share price as it seems to differ for each company?

Edited by Centurion07 on Tuesday 31st March 11:41
There isn't one.

The spread is partly used to control demand. A high spread reduces trading demand, because as you realised, you have a higher obstacle to immediate profit. If the market maker has a load of inventory to get rid of, they might lower the spread to stimulate activity and get people buying, but if they have a thin supply, they might increase it.

The spread is also how the market makers make profit. Buy from one person at a low price, sell to another for more. You can see how you might extend that profit margin back and forth in the face of very variable demand - hence the spread again.

trashbat

6,005 posts

152 months

Tuesday 31st March 2015
quotequote all
Finally, if you really are talking about a single £200k transaction with no prior experience, it sounds like you need some proper advice & oversight.

Centurion07

Original Poster:

10,381 posts

246 months

Tuesday 31st March 2015
quotequote all
Would I be right in saying the bigger spread, the less liquidity that company's shares have and, as a result, are more likely to cause problems if trying to deal a large amount?

trashbat

6,005 posts

152 months

Tuesday 31st March 2015
quotequote all
Centurion07 said:
Would I be right in saying the bigger spread, the less liquidity that company's shares have and, as a result, are more likely to cause problems if trying to deal a large amount?
They might well be related - liquidity is just a function of supply, so think how that fits into my previous post - but it's not a direct link.

Centurion07

Original Poster:

10,381 posts

246 months

Tuesday 31st March 2015
quotequote all
Cheers. Hadn't seen your post when I typed mine.

That's pretty much what I understood it to be.

I don't seem to be able to locate the NMS anywhere though, unless it's displayed as something else?

trashbat

6,005 posts

152 months

Tuesday 31st March 2015
quotequote all
LSE display it. As an example:

http://www.lse.co.uk/share-fundamentals.asp?sharep...

It's called "market size" there, and is 7,500 for Barclays, so about £18k. I have no idea whether that's accurate.

EMS or "exchange market size" is the term I was looking for before - same thing.

Centurion07

Original Poster:

10,381 posts

246 months

Tuesday 31st March 2015
quotequote all
Thanks for that.

I was kind of tempted to dabble a little bit, but the amount of knowledge required seems a little imposing.

trashbat

6,005 posts

152 months

Tuesday 31st March 2015
quotequote all
As another poster suggested, you could try a practice account, although this has the huge and probably unrealised problem that it's not your real money, so you don't make poor, emotionally-driven decisions. You might however learn something.

My suggestion would be that if you have a useful sum - one that sufficiently outweighs the dealing costs - but one that you can afford to lose, then you should try investing it in something you understand well, enjoy, and expect to outperform the average person's expectations of it. You should construct a plan from the outset, be patient and avoid the temptation to jump around to more exciting pastures just because you're bored.

For me this was Fiat and I doubled or tripled my money. I also lost a lot of money fiddling around with other things that essentially amounted to gambling.

There is plenty of advice on these forums, plenty of it good, but remember that it can be dangerous and there is ultimately no requirement to put your money into it. A lack of technical knowledge is the least of your problems.


walm

10,609 posts

201 months

Tuesday 31st March 2015
quotequote all
You are absolutely mad to put £200k in one share unless you have c.£2m in highly liquid assets such as cash, with net worth well >£2m.
Particularly if it is one that has a big enough spread to worry about. i.e. it's illiquid and small.

I strongly suggest you talk to an IFA.


jeff m2

2,060 posts

150 months

Wednesday 1st April 2015
quotequote all
walm said:
You are absolutely mad to put £200k in one share unless you have c.£2m in highly liquid assets such as cash, with net worth well >£2m.
Particularly if it is one that has a big enough spread to worry about. i.e. it's illiquid and small.

I strongly suggest you talk to an IFA.
If I'm looking at the right LMS then the price/NAV is probably more relevant than the spread as it is a private equity fund.
The Price/NAV is based on 3 month NAV reporting!

From what I was able to see it holds 20& in Equity, 0 in Bonds 10% cash and almost 80% in other, it's top 5 h0ldings look ok, but more info came up as "not available at this time" (unusual

I guess the OP got this as a recommendation from someone.

A neutral from mesmile

walm

10,609 posts

201 months

Wednesday 1st April 2015
quotequote all
jeff m2 said:
If I'm looking at the right LMS then the price/NAV is probably more relevant than the spread as it is a private equity fund.
The Price/NAV is based on 3 month NAV reporting!

From what I was able to see it holds 20& in Equity, 0 in Bonds 10% cash and almost 80% in other, it's top 5 h0ldings look ok, but more info came up as "not available at this time" (unusual

I guess the OP got this as a recommendation from someone.

A neutral from mesmile
What on earth are you talking about?
I don't think the OP has given any hint as to what trade he is looking at has he?

jeff m2

2,060 posts

150 months

Wednesday 1st April 2015
quotequote all
walm said:
jeff m2 said:
If I'm looking at the right LMS then the price/NAV is probably more relevant than the spread as it is a private equity fund.
The Price/NAV is based on 3 month NAV reporting!

From what I was able to see it holds 20& in Equity, 0 in Bonds 10% cash and almost 80% in other, it's top 5 h0ldings look ok, but more info came up as "not available at this time" (unusual

I guess the OP got this as a recommendation from someone.

A neutral from mesmile
What on earth are you talking about?
I don't think the OP has given any hint as to what trade he is looking at has he?
I mis read NMS as LMS and recog'd it as PE Fund, I shall now find a small rock to hide under.

walm

10,609 posts

201 months

Wednesday 1st April 2015
quotequote all
jeff m2 said:
I mis read NMS as LMS and recog'd it as PE Fund, I shall now find a small rock to hide under.
Ah! Fair enough. I thought I was going mad!

(Also as an aside - it's totally standard for PE funds to have just a quarterly NAV - even that is probably hard enough. You can't really mark private companies to market quite as easily as listed ones!)

Skyedriver

17,655 posts

281 months

Wednesday 1st April 2015
quotequote all
On a more general note, what are people on PHs feelings on Europe & US Funds
Buy Hold or Sell?
THere seems to be a lot of talk about US Funds run coming to an end and Euro stocks improving but at the same time, at the moment anyway, Euro stocks seem to be bound up by regulation and a posible Grexit and US stocks still seem to be climbing.