0

Equity Trading UK Guide 2021

40 Min Read
Last Updated March 25th 2021

The equity trading market is popularly known as the 'stock market' - whereby you trade stocks or shares of publicly traded companies. 

As with any other financial instrument, the idea of equity trading is to speculate on the rise or fall of stock prices - with the view to make consistent profits. 

If you’re looking to start trading equity, then you’ve come to the right place. This guide is for you. We’ll explain how equity trading works in the UK.

If you want to dive into equity trading in the UK, get started today with eToro!

Content:

What is Equity Trading UK?

Cash Equity Trading UK

Ways of Trading Equities in the UK 

Advantages of Equity Trading UK

Risks of Equity Trading UK

Equity Trading UK Strategies

Equity Trading UK Order Types

Tips for Equity Trading UK

How to Find the Best Equity Brokers UK of 2021?

How to Start Equity Trading UK – A Step by Step Walkthrough 

Conclusion

FAQs

Below, we will cover everything you need to know about Equity Trading in the UK. This includes equity trading strategies, supported markets, potential fees to consider, and how you can find a reliable online broker to get started today. 

What is Equity Trading UK?

‘Equity’ is a common term used to refer to traditional stocks and shares. Therefore, when you engage in equity trading, you will be buying and selling stocks of publicly listed companies. 

The underlying concept of equity trading is to profit from the price movement of these stocks. The positions you enter might last anywhere between a few seconds to a few months - depending on your equity trading strategy. 

For instance, if an equity trader in the UK believes that the value of BP stocks is going to rise in the coming weeks, they will look to capitalize on this by placing a ‘buy order’.

In another example, if a trader thinks the shares of Rolls Royce are overvalued, they will look to benefit from falling prices. 

This is called short-selling - where you sell shares at a higher price to repurchase them at a lower price. In order to choose this, you would simply need to place a ‘sell order’ at your chosen UK equity trading broker.  

As such, equity trading in the UK allows you to turn a profit from both the rising as well as the falling stock markets. 

Cash Equity Trading UK

Cash equity trading is a term used to describe buy and sell positions conducted by large, institutional traders. They buy and sell stocks on their own as well as on behalf of their clients - who could be an individual investor, an investment trust, or a mutual fund. 

Put differently - these firms are responsible for speculating on the future value of stocks. If they predicted correctly, their client will make money on the trade. In return, the firm makes a commission for speculating in the right direction.

For the most part, these large financial institutions purchase millions of pounds worth of equities via a single trade. In some cases, such a large investment is sufficient to drive the price of the respective shares up.  

The investment capital required for such large trades come directly from the institution in question. As such, considering the volume of capital involved, individuals do not engage in cash equity trading. 

Ways of Trading Equities in the UK 

Equity trading in the UK can be carried out in several ways. The course you take will depend on a variety of factors - such as whether you want to invest in stocks for the long-term or trade them on a short-term basis. 

In this section, we explore the different financial instruments available at your disposal to trade equities from the comfort of your home. 

Equity Trading UK by Buying Shares

The conventional way to trade equities is to buy the shares outright. That is - you will be taking ownership of the stocks you purchase. The best way to do this is to use an online broker who offers your chosen equity. 

Taking a long-term strategy, traders hold onto their assets for several years. This gives you the right to collect dividend payments - that you can use to fund other trading endeavours. 

In other words, you will essentially be investing in the equities rather than trading them. 

The drawback is that investing in equities does not give you the same flexibility that trading presents. For instance, you cannot leverage your trades, or short-sell the stocks without borrowing money from the broker - which will cost you additional fees. 

However, there are also a number of notable benefits that come alongside traditional equity purchases. For example, at FCA broker eToro, you can invest in equities at zero percent commission, and hold on to your assets without having to pay any ongoing fees. 

When the right time to cash out your investment comes along, you can sell your equities back to eToro at the click of a button. All this can be done entirely online, and your profits will be directly deposited into your eToro equity trading UK account. 

Equity Trading UK with CFDs

As opposed to investing, the process of trading equities is considered a short-term approach. That is because professional equity traders often keep their positions open only for a few hours to a maximum of a few weeks. 

In these cases - traders will be placing multiple equity positions throughout the day, targeting low-profit margins in the range of 1 to 2%. 

Sometimes, equity traders in the UK place dozens of trades per day, five days per week. If the trader is consistent in making the right prediction - these small profits can add up to a significant sum. 

However, when trading in the short-term, it is crucial that you use an online broker that offers competitive fees and commissions. If not, the aforementioned daily target gains of 1 - 2% will quickly get swallowed up. 

As such, the vast majority of short-term equity trading is done using CFDs. 

A CFD (Contract for Difference) is a derivative instrument that tracks the value of the underlying asset. They allow you to trade equities without owning the stock. Instead, you will be speculating on CFDs that mirror the real-world price of the equity. 

For instance, 

  • If HSBC is valued at 390p on the London Stock Exchange, the respective CFD will also be valued at 390p. 
  • If the value of HSBC shares moves up to 420p by the end of the day, so will the value of the CFD instrument. 

The most notable advantage of equity CFD trading is that you have the possibility to go both long and short. This gives you the opportunity to speculate on price movements in either direction. 

Here is an example to demonstrate how equity trading UK works when utilizing CFDs. 

  • Let's say BT shares are valued at 140p each on the LSE.
  • You expect the shares to drop their value in the next few days.  
  • Thus you place a sell order worth £5,000 with your online broker. 
  • A few days later, BT shares fall by 2%. 
  • As such, the CFDs also hold the same price as the LSE is quoting on BT. 
  • You decide to collect your profits by placing a buy order
  • On your stake of £5,000, your 2% gains made you a profit of £100. 

As you can see from the example above, the CFDs mirrored the exact same price of BT shares. When the stock price of BT went down - so did the price of the respective CFDs. 

Moreover, you can also get access to leverage when trading equities via CFDs - which we will cover in more detail shortly. 

Ultimately, CFDs offer an excellent way to trade equities in the UK without having to purchase the underlying stock. 

Equity Trading UK with Options 

Equity options, also known as 'stock options' are considered a more advanced approach to trading shares. For those unaware, equity options are contracts that give you the right to buy or sell a stock at a pre-decided price and time.  

Trading equity options gives you added flexibility as well as purchasing power.

However, it also requires you to pay a small fee called a 'premium'- which usually falls within the range of 5% to 10% of the contract value. 

Typically, an options contract consists of 100 stocks. Instead of buy and sell orders, you will be choosing between Calls and Puts. 

  • You buy a Call Option when you expect the price of the equity to rise within the predetermined time. 
  • You buy a Put Option if you expect the value of the equity to fall within the predetermined time. 

It is worth noting that when you trade options, you have the 'right' to buy or sell the stock at the prefixed date and price - but you are not obliged to execute the trade. 

Meaning - if your prediction was wrong, you will only lose your premium and nothing more.

As we mentioned earlier, trading equity options can appear complex to new traders. To clear the mist, check out the quick example listed below. 

  • Let's say you think that the value of Barclays shares is undervalued at its current price of £10 per equity
  • Your online broker offers a 2-months options contract. 
  • As you expect the price of Barclays will increase before the options contract expires - you purchase a call option.
  • The contract is for 100 stocks of Barclays, and at a premium of £1 per share. 
  • This means - you have to pay £100 to the broker to access the market.
  • Before the options expire, the price of Barclays stocks rises to £15 each.
  • This shows a £5 increase in the price of each stock - therefore, you can collect your profits by exercising your right to sell the equities.
  • On your 100 shares - you will make a profit of £50 - less the premium of £100 that you paid to access the market.
  • In total, this means that you made a total profit of £400 on the UK equity trade. 

On the contrary, if the price of Barclays shares did not increase, you would not have had to sell the stocks. In this case - you will only lose the premium of £100 when the contracts expired. 

As you can see from this example - when trading options, you only have to pay the premium to gain access to the market. You need not invest in the stocks nor take ownership of the asset. 

Read Also: How to Trade Stock, How to Survive Stock Trading

Advantages of Equity Trading UK

advantages of equity trading uk

Are you wondering whether equity trading is the right path for you to enter the stock market? If so, take a look at some of the benefits of trading equities in the UK. 

Here are the best things about equity trading:

High-Profit Potential 

It is true that investing in stocks can get you exponential returns in the long-term. However, it might require you to wait for a few years to get there. 

Moreover, you could also be exposed to downward market trends and end up losing a sizable chunk of your investment. 

On the other hand, compared to long-term strategies, equity traders can benefit not only from the upward price movement but also from the falling prices, too. 

In short-term trading, you can turn profits more frequently by targeting smaller margins available in the market. Each profitable trade will add more funds to your trading account - which you can use to increase the purchasing power on your next trade. 

These repeated wins can amount up to significant profits in the long-term. 

Access to Both UK and International Markets 

Not all that long ago, UK equity traders only had access to companies listed on the London Stock Exchange. But, thanks to online equity trading brokers, today you can buy and sell shares in both domestic and international markets. 

For instance, popular equity trading platform eToro gives you access to more than 2,400 shares across 17 stock exchanges. 

This allows you to engage in equity trading not only in the UK but also in the US, Europe, Asia, and beyond. 

Short-Selling

As we mentioned above, short-selling is one of the biggest advantages of equity trading UK. As opposed to long-term investments, you can find trading opportunities regardless of which direction the market moves. 

Thanks to CFD trading, you can now profit even when the price of the stock drops. This makes it possible for you to hedge your trades to some extent - a strategy that is crucial to reduce risk. 

Leveraged Trades 

Equity traders in the UK also have the option to apply leverage on their positions. Leveraging enables you to gain more exposure in the market by paying only a small fraction of the total stake amount. The rest - you will be borrowing from your broker. 

For example:

  • Let's say that you only have £1,000 in your trading account.
  • You want to trade 100 shares of AstraZeneca at £50 per stock
  • You apply leverage of 1:5 on your equity trade
  • This allows you to trade with £5,000 - when you are only putting up £1,000 of your own money. 

In other words, leveraging allows you to target significantly larger profits than what your account balance would permit. 

According to the ESMA regulations, equity traders in the UK can access a maximum leverage amount of 1:5 on equity trades. 

Start Trading Equities UK With a Low Amount of Capital

Traditionally, traders needed to put up considerably large sums to start trading. However, with the emergence of user-friendly online platforms, equity trading is possible by staking much lower amounts. 

For instance, on eToro, you only need a deposit of a minimum amount of $200 (about £160) to start trading equities. Crucially, the minimum stake per equity trade is just $50. 

The best part is that many new-age brokers also allow you to trade equities at zero commission. This means you will be saving a significant amount of fees,  allowing you to trade equities with a short-term strategy that targets smaller margins. 

Ready to dive into equity trading?

Risks of Equity Trading UK

While the advantages are many, it is also crucial to understand that - like all other financial markets, equity trading also comes with its own risks. In other words, if you speculate the market incorrectly, you will end up losing capital. 

Like in the case of leverage - while it can magnify your profits, it can also amplify your potential losses. 

As such, it is important that you calculate the risks and manage your trading funds before opening positions. 

Many traders use a 'bankroll management strategy' to limit their stakes on equity trading. A common rule of thumb is not to stake more than 2% of the available trading account on a single trade. 

For example, if there is only £1,000 in your account, you will not risk more than £20 on a single equity trade - and so on. 

Such a bankroll management strategy will help to mitigate your losses while trading equities. 

Additionally, you can also take advantage of stop-loss trading orders to limit your losses if the trade goes against you. We will cover more on 'stop-loss' and other trading orders later in this equity trading UK guide. 

Equity Trading UK Strategies

equity trading strateies

Trading strategies are essential when you are looking to capitalize on the market movement of stocks. They allow you to give yourself the best possible chance of making gains. 

Most trading strategies rely on technical analysis, charts, indicators, and patterns to predict the future price of a financial asset. 

When trading equities in the UK - it is important that you find a strategy that best aligns with your financial goals and appetite to risk. 

Below, we have a breakdown of the most common strategies used when accessing the equity trading UK market. 

Buy and Hold Equity

If you are new to equity trading - we recommend that you try out the 'buy and hold' strategy first. Put simply; you will be investing in equities and holding on to them until it is the right time to cash out your profits. 

Some traders hold on to their equities for several months or years based on their trading goals. 

The biggest advantage of this 'buy and hold' strategy is that you do not have to concern yourself with the short-term price movements of the stock. Instead, you are speculating on the long-term potential of the chosen company. 

  • For instance, take the case of Apple. 
  • At the beginning of 2016, the value of Apple equities stood at $24 per share. 
  • Fast forward to early 2021; Apple equities are now priced at about $142 per share.

As you can see, over the course of five years, Apple has grown by almost 500%. 

In addition to this, if the respective company pays a dividend, as the owner of the equity, you also hold the right to receive these payments. This gives you the opportunity to reinvest the funds into other equities and grow your money faster. 

Swing Trading 

When you have gained sufficient experience with equity trading, you might want to consider short-term strategies - such as swing trading. 

Swing trading is an approach where you hold a position for a short period of time - hoping to capitalize on changes in price momentum. 

Typically, a swing trader keeps their equity trades open anywhere from a couple of days to a few weeks. 

In this active equity trading strategy, you are hoping to take advantage of the upward and downward swings in stock prices. 

  • For instance, if Royal Mail stocks have been rising steadily for 1-2 weeks, a swing trader will hold their buy position open for the duration of this trend. 
  • When the movement is about to reverse or take a 'swing' in the opposite direction, the trader will exit their trade - thus making profits in turn. 
  • Similarly, if Royal Mail stocks are showing a downward trend, the swing trader will open with a sell position - hoping to benefit from the reversal. 

Traders who engage in swing trading of equities find their opportunities using technical analysis and trading indicators. These tools are used to identify the price patterns and potential trend directions of the chosen equity. 

Day Trading

Day Trading has the same underlying strategy as 'swing trading'. However, the main distinction is day traders exit their positions before the market closes by the end of the day. 

In other words, day trading positions are limited to a single trading day, whereas swing trading might hold positions for several days to weeks. 

Equity day traders look to place multiple positions throughout the day - hoping to make modest but regular gains. As such, their positions might be kept open only for a few hours - or sometimes only for a few minutes. 

If you end up making more gains than losses - you will end the day in profit.  As you can guess, day trading requires you to make swift decisions based on the minute market movements of the stock. 

As such, this equity trading UK strategy is best reserved for those who have an in-depth knowledge of the market and technical analysis. 

Scalping

Scalping is an intraday equity trading strategy where you will be buying and selling stocks frequently throughout the day. As such, you will rarely keep a position open for more than a few minutes.

The main idea is to profit from the slightest of price movements and end the trade before market conditions change. 

A scalp trader will have to devote most of their time to following short-term market movements. This is because they have to take action right away when an opportunity opens up and manually see the trade through. 

Read More: Scalping Trading UK Guide 

Equity Trading UK Order Types

As we touched upon earlier, orders are one of the ways you can take control of your equity trading positions. 

These trading orders convey to your online broker what position you want to take. This will include aspects such as whether you want to go long or short, at what price you want to enter the market, and when you want to exit it. 

If you plan to engage in equity trading, it is necessary that you have a solid knowledge of the different types of orders. 

In this section, we will explain the most commonly used equity trading orders and how they work. 

Buy Orders and Sell Orders

These are the most fundamental of all equity trading orders. Regardless of which financial asset you trade - be it stocks, forex, or commodities, you will have to enter the market by placing one of these orders. 

For instance, 

  • If you think that the price of the equity will increase - you place a buy order. 
  • If you think that the price of the equity will decrease - you place a sell order. 

Every equity trade you place will need you to use both a buy and sell order - regardless of what position you take. 

  • If you go long and enter the market with a buy order - you will close the equity trade with a sell order. 
  • If you want to go short and enter the market with a sell order - you will use a buy order to close the equity trade. 

Market Orders and Limits Orders

Buy and sell orders tell your online broker which way you think the price of the equity will move. However, you also need to specify when you want to enter the market. 

After all, in short-term equity trading, you want to take advantage of the minute changes in stock prices. As such, you need to make sure that your trade is executed at the right time. 

When you open a trade, your online equity broker will invariably ask you whether you want to place a 'Market order' or a 'Limit order'. 

Market Order

A market order indicates to your broker that you want the equity trade to be executed immediately. This is especially useful if you come across a lucrative opportunity on the market and want to leverage it right away. 

However, due to market volatility, there might be a slight variation between the price at which you place the equity order and the price at which it is executed. 

For instance: 

  • Let's say you are looking to place a buy order on British American Tobacco PLC (BAT) equities 
  • The shares of BATS are currently priced at £27.24 per stock.
  • You proceed with a market order so you can trade instantly. 
  • A few seconds later, your buy order is executed at £27.26 per stock. 

As you can see, instead of £27.24, your trade was carried out at £27.26 - leaving a minuscule difference of just £0.02. 

Limit Order

A limit order, on the other hand, lets you enter the equity market at a specific price. To no surprise, the vast bulk of equity trading is carried out using limit orders. This is because they give you complete control over the entry price of your equity trades. 

Let us explain with an example. 

  • You want to place a buy order on BAT- which is priced at £27.24 
  • You believe that if the price of BAT breaches £27.90, then the stock will show an extended upward price movement. 
  • As such - you only want to enter the market when the price of BAT hits £27.90
  • So, you place a limit order at £27.90. 

Once your limit order is placed, the trade will remain pending until the value of BAT meets the predetermined price point - in this case, £27.90. 

In other words, your order won't be executed unless the market price of the equity matches your specified price level or you manually cancel the order. 

Stop-Loss Orders and Take-Profit Orders

Market and limit orders allow you to control when you want to enter the market. These are otherwise known as "entry strategies". 

That said, you also need a few "exit Strategies" in place to take full control over your equity trading orders. These orders allow you to decide how you want to close your trade. 

Stop-Loss Orders

A stop-loss order is used to limit a trader's loss on an equity position. As you can guess, this order type is crucial for you to mitigate the risks involved in equity trading. 

No matter what your trading expertise is, or how confident you are about your prediction - it is always recommended to use a stop-loss order on all your positions. 

As you can infer from the name, a stop-loss order is used to limit your losses in case the market moves against your trade. 

More importantly, it will let your broker know at what exact price you want to close the equity trade. 

Generally, stop-loss orders are calculated as a percentage. 

Let us clear the mist with an example:

  • Let's say you want to place a buy order on HSBC stocks. 
  • But you do not want to avoid losing more than 1.5% of your investment.
  • As such - you will set up a stop-loss order that is 1.5% below your entry price. 

However, if you want to place a sell order, you will set your stop-loss order at 1% above your entry price. 

Regardless of which position you take - long or short - your stop-loss order will limit your losses to 1%. 

Here is a practical example of how stop-loss orders work. 

  • Let us take the case of HSBC equities, and say they are currently priced at £1.50 per stock. 
  • You take a short position as you think the price of the equity is going to decrease. 
  • In order to ensure that you do not lose more than 1%, you place a stop-loss order at £1.515

Ultimately, stop-loss orders eliminate the need for you to close the trade to limit your losses manually. You can rest assured knowing that if the market turns against you - the most you will lose is the risk you are willing to take. 

Take-Profit Orders

At this point, we have covered how you can enter the market, how you can close your orders, and how you can limit your losses. 

Now, the only thing left is to define your profit target. That is where you use take-profit orders

A take-profit order tells your broker at what specific price you want to lock your profits. 

For example: 

  • You place a buy order on HSBC stocks at a price of £1.50. 
  • Your profit target, in this case, is 4% - meaning you want the price of HSBC to rise by 4%. 
  • Therefore - you place a take-profit order at £1.56. 

If you speculated correctly, and the price of HSBC equities increases to £1.56, your broker will cash in your profits at 4%, and automatically close your position. 

Normally, equity traders place both stop-loss and take-profit orders at either direction of the entry price. This way, regardless of how the market moves - your respective orders will be automatically executed. 

Ready to start your Trading Journey?

Tips for Equity Trading UK

Now that we have covered some of the strategies behind equity trading, we will look at how you can start building your skills. 

Consider the following equity trading tips before taking the plunge!

Tip 1: Trade Equities using a Demo Account

Most well-reputed equity trading UK sites will give you access to a demo account. As you can guess from the name - these demo accounts allow you to engage in equity trading using ‘paper money’. 

In effect, you will gain access to real-world market conditions, but you will not have to risk a single penny. 

As evident, this can help you significantly to learn the ropes of equity trading. You can familiarise yourself with equity trading strategies as well as risk management. When you are ready to start in the real equity market - you can switch your trading account at any time. 

Tip 2: Consider Copy Trading 

On trading platforms like eToro, you can take advantage of a feature called 'Copy Trading'. This allows you to copy the trading strategies of an expert equity investor. 

In other words,  you can select a trader of your choosing and replicate what they do in your own portfolio. As such, you will essentially have these experienced equity traders placing orders on your behalf. 

This feature is especially useful if you are a complete novice in the world of equity trading. You do not have to invest in learning technical or fundamental analysis behind advanced strategies. 

Instead, you will be investing a minimum of $200 in your respective copy trader, and let their strategies work for you. 

However, Copy Trading on eToro still gives you control over your portfolio. For instance, you can decide when to exit the position and use individual orders to adjust the trades according to your goals. 

Tip 3: Sign up for Equity Trading Signals 

If you are not confident about your technical analysis skills or rather do not have sufficient time to invest in research, it is best to consider an equity trading UK signal service. A ‘signal’ is a recommendation that tells you what equity to buy or sell, when to enter the market, and at what price

An equity signal platform will provide you with these suggestions in real-time so you can instantly take advantage of market movements. Moreover, the best providers will also include the stop-loss and take-profit prices, as well as the risk-reward ratio. 

This ensures that you are fully aware of the risks involved and can place the essential orders to mitigate your losses. 

Tip 4: Learn Technical Analysis 

There are indeed a few ways you can bypass the need for technical research. That said, the most experienced equity traders always prefer to do their own analysis to take full control over their trading choices. 

However, this requires you to have a firm grasp of the workings of trading markets and technical indicators. 

Technical analysis involves studying, evaluating, and interpreting historical pricing charts. The idea is to infer data from these pricing trends and understand how these trends can be used to predict the future market movement of the equity in question. 

This analysis is primarily done using technical indicators such as the MACD and Relative Strength Index. There are also dozens of other technical indicators available to you online. 

Tip 5: Take an Equity Trading Course

An online course is an excellent way to gain knowledge about the ins and outs of the trading arena. These days, there are hundreds of courses available that are flexible to fit into any schedule.

Moreover, you can also pick a course based on your current trading level.  These programs can accommodate complete beginners to advanced traders looking to hone their equity trading skills. 

Some of these courses are also provided in real-time, meaning you will be able to interact with the provider during the class. 

How to Find the Best Equity Brokers UK of 2021?

equity brokers in the uk

As you might have noted from this guide, your online broker plays a significant role in the smooth execution of your equity trades. As such, it is paramount that you have a reliable online broker by your side. 

Most likely, you will be overwhelmed by the sheer number of equity trading UK platforms on the web. 

With this in mind, here we list the many factors that will guide you in your search for the ideal equity trading broker. 

Regulation and Licensing

When you are choosing your online broker, you are essentially entrusting your trading funds with them. Consequently, it is imperative that the broker of your is licensed by proper regulatory bodies. 

The first step is to therefore check whether the broker holds any valid licenses. 

  • In the UK, equity trading brokers are regulated by the Financial Conduct Authority (FCA). 
  • You can also find brokers licensed from other well-known regulatory bodies such as the Australian Securities and Investments Commission (ASIC) and the Cyprus Securities and Exchange Commission (CySEC). 

In other words, if a broker does not hold a license from any of these bodies, it is best to take your business elsewhere. 

That said, commission-free equity trading platform eToro is licensed by all three of the above bodies. Plus, as a UK trader, you are protected by the FSCS.

Supported Equities

As we are focusing on equity trading, you first need to ensure that your chosen platform offers your preferred market. For example, while some UK equity traders prefer to focus on the London Stock Exchange, others are more interested in foreign companies. 

In particular, the US stock markets are popular with short-term traders - as this is where you will find equities like Amazon, Google, Tesla, and Ford Motors. 

Our top-rated equity trading UK platform eToro offers access to 17 UK and international markets. 

Read Also: What Are The Top 10 British Shares To Consider For 2021?

Ownership or CFDs

Before you get started, it is important that you determine whether you want to go for the 'buy and hold' strategy or trade equities in the short-term using CFDs. 

As we have covered earlier, if you want to take ownership of the stock, it is best to find a broker who does not charge you any ongoing fees or trading commissions. 

This will allow you to hold on to your equities as long as you want - without having to pay additional trading charges. 

On the other hand, if you want to trade using CFDs, you also get access to leverage and short-selling. 

Bear in mind that, in the UK, leverage on equities is limited to 1:5. Moreover, when trading with CFDs - you will be required to pay 'swap fees' to keep your positions open overnight. 

Trading Platform

Most online brokers also allow you to invest and trade right through their website. This eliminates the need for you to rely on software to place your traders. 

You can handle the entire process of trading by logging into your brokerage account on your web browser. This might strike as the most convenient way to engage in equity trading. 

However, if you heavily rely on technical analysis, you might also be favouring trading platforms such as MetaTrader 4, MetaTrader 5, or cTrader. 

In these cases, you have to verify whether your online broker supports these third-party equity trading platforms. 

Additionally, it is also best to choose a broker who has a native mobile equity trading app. This will allow you to access your equity trading UK accounts and manage them from anywhere at any time. 

Ready to dive into equity trading in the UK? Get started today!

UK Equity Trading Fees

As it goes, all online brokers are businesses. In order to execute your equity trading orders, they charge you fees and commissions in turn. 

These fees can differ quite considerably from one broker to another. 

Below is a list of the most common equity trading fees that you are likely to come across on UK brokerage platforms. 

Dealing Fees

Dealing fees are commonly applicable for equities. This is usually charged as a fixed rate for each equity trade you place. 

For example: 

  • Let's say your UK equity broker charges you £5 per trade. 
  • No matter your investment amount - you have to pay £5 when you open a trade, and again, when you close the trade. 

At this point, it is worth noting that not every broker charges you this fee. For instance, at eToro, stock trading is possible without any equity dealing fees. 

Trading Commissions

The trading commission is a direct fee charged by your broker on all equity trades. 

The commissions are either calculated as a flat rate per trade, or as a percentage against the size of your position. 

In stark contrast, eToro allows you to trade equities at a zero-commission rate. You will only be charged the spread - which we explain next. 

Spreads

The spread is calculated as the difference between the buy price and the sell price of an equity. A larger price gap means that the spread will be higher on the trade. 

Therefore - you want to look for brokers who offer tight spreads on the equity market. 

As opposed to commissions, the spread is calculated as an indirect fee. In other words - if your broker charges you 0.70% as the spread, you are starting the trade at 0.70% in the red. 

This means that you need your position to make 0.70% in gains to get to the break-even point. 

Deposits and Withdrawals

In order to start trading equities with an online broker, you will first need to fund your trading account. 

The best equity brokers UK have a variety of payment options for you to choose from. For example, at eToro, you can deposit funds through credit/debit cards and bank transfers, as well as e-wallets such as Paypal and Neteller. 

You should also note the deposit and withdrawal fees charged by the broker. Some platforms cover the charge of deposits, while others charge a small fee. 

Tools for Beginners

The trading requirements for beginners are entirely different from those of experienced pros. As such, if you are new to the equity scene, you want a trading platform that offers a welcoming interface as well as useful tools for you to learn to trade. 

Here are some of the features most sought-after by equity trading novices: 

Educational Tools

It is fairly obvious that beginner traders can benefit from educational resources. The best UK equity trading platforms provide these learning materials in the form of explainers, guides, and tutorials. 

For instance, on eToro, you can find podcasts, daily market analysis, video tutorials, and a trading school entirely dedicated to beginners. 

Automated Trading

As we mentioned earlier, online brokers such as eToro have a Copy Trading feature on the platform. These allow you to invest passively - by mirroring the trading strategies of experienced equity traders. 

For instance, if your chosen equity trader buys 100 shares of HSBC, the same trade will be carried out on your account. If they decide to sell the shares, you will do the same. 

These trades are automated but still allow you to control your trading account. You can choose to add or remove assets from your portfolio at any time. 

Tools for Experienced Traders

While beginners are looking for intuitive platforms that can adapt to their level, seasoned traders need more advanced features that can aid their tried and tested strategies. 

This is especially crucial for day and swing traders who depend on technical analysis for their equity positions: 

Here is a list of research tools available at the best equity trading platforms in the UK:

  • Technical indicators such as the MACD, RSI, market sentiment, and moving averages 
  • Chart drawing tools to help with analysis 
  • Customizable trading interface - with features such as custom watch lists and multiple charts
  • Integration with automated trading robots 

Customer Service

As with any other business, you want an online equity trading site that offers reliable customer service whenever you need it. These days, most online brokers come equipped with live chat options - allowing you to connect to an agent right through the website. 

That said, if you would rather speak to a customer specialist over the phone - ensure that the platform has a phone number listed on their site. 

It is best that you stay away from brokers who only offer assistance through emails. 

After all, this means that you will not get support in real-time, and might have to wait for several days to get a response from the team. 

How to Start Equity Trading UK – A Step by Step Walkthrough 

Are you ready to test the waters of equity trading UK? 

Once you have found your online broker, all you need to do is to open your trading account and start placing orders, 

As we emphasized throughout the guide - eToro comes ahead as the overall best online equity broker for traders of all levels. 

We will therefore end our guide by showing you how you can get started with eToro. 

Step 1: Open an Equity Trading UK Account

You can create a new account on eToro by clicking the 'Join Now' button on the home page. 

Then, enter your full name, address, date of birth, and phone number. 

Since eToro complies with KYC regulations - you will also have to verify your identity. This can be done by uploading a copy of your passport or driver’s license. 

Step 2: Fund Your Account

To start trading equities on eToro, you need to add money to your account. The minimum deposit required on the platform is $200. 

You can choose to deposit funds through a bank transfer, credit/debit card, or e-wallets. 

Step 3: Place Your First UK Equity Trade

With your account loaded with funds, you can now search for equities to trade. Head over to ‘Trade Markets’ and select ‘Stocks’ from the list. 

This will lead you to a dashboard where you can find the most popular equities on eToro. 

These will be classified into categories such as technology, financial services, consumer goods, etc. 

You can also find equities by entering the stock name in the search bar at the top of the page. 

When you have found an equity you want to buy or sell, click on 'Trade'. This will open a new order form - where you can enter the amount you want to trade, and specify your trading orders. 

If you are trading equity CFDs, you can also select the amount of leverage you want to apply. 

Once ready, click on 'Open Trade' to place your first equity trade on eToro - commission-free! 

Equity Trading UK - Conclusion

To sum up - equity trading UK refers to the process of buying and selling stocks. You can trade equities both in the long-term and short-term - depending on what your financial goals are. 

If you have read our guide thoroughly - you should know what strategies and risks are involved when trading equities in the UK. 

Now all you need to do is to use our checklist and find the right online broker for you and your equity trading needs. 

For those who want to skip the research process - we recommend that you check out eToro. The platform is regulated by the FCA and gives you access to 17 equity trading markets at zero commission! 

eToro – TOP UK Equity Trading Platform with 0% Commission

etoro broker

eToro have proven themselves trustworthy within the stock market over many years – we recommend you try them out.

Your capital is at risk. Other fees may apply

FAQs

What are equity derivatives?

Equity derivatives are financial instruments that track the value of the underlying equity. Prime examples of equity derivatives include CFDs and options. 

Is equity trading and stock trading the same? 

Equity trading and stock trading are more or less the same. The only distinction is that equity trading could also refer to an ETF, other than just stocks of individual companies. 

Is it possible to trade international equities from the UK? 

Yes, online equity brokers in the UK can give you access to international markets. At eToro, you can buy and sell shares from exchanges in the US, Europe, Hong Kong, and more! 

What is the minimum amount required to start trading UK equities? 

At eToro, you can start trading equities by meeting a minimum deposit of just $200 - which is about £160. 

Do bonds fall under equities? 

Bonds are part of the debt market and are not considered equities. 

Which is the best mobile equity trading app?

The best mobile trading app for you will depend on what features you are looking for. We can recommend eToro's mobile app - as it is user-friendly, and allows you to trade on the go commission-free. 

Top Brokers in
    All Regulated Brokers
    67% of retail clients lose money when trading CFDs with this provider.