The Beginner’s Guide to LSE Shares

How to Buy and Sell London Stock Exchange Shares (LSE Shares)

To trade London Stock Exchange Shares (LSE Shares), either you can use a traditional stock brokerage firm, or you can use a CFD service. We will explore the pros and cons each of these approaches.

Advantages and Disadvantages of Trading London Stock Exchange shares (LSE shares) as a CFD

A CFD (or ‘Contract for Difference’) is a method of trading instruments, like shares, without needing to own those shares. Here are some advantages and disadvantages of CFD trading when compared to using a traditional stock brokerage.

Advantages:

The main advantage to using a CFD broker is the leverage which they offer to their clients. This means that a trader would require much smaller account sizes that are relative to the size of a trade, in comparison to a traditional share dealing broker.

For example, a traditional brokerage offers leverage of 1:10 on the London Stock Exchange shares. This leverage means that at the current price of £3,483.85 per share, to purchase 50 LSE shares with no leverage, it would cost a total of £174,193. However, by using a leverage of 1:10, a trader would just require an account size of £17,419 to place the trade with a CFD broker.

CFD brokers allow traders to go long or short. This means that a trader could benefit from the markets rising and falling.

CFD brokers usually don’t charge a commission. Instead, CFD brokers have their fees included in the spread.

CFD brokers that offer the MT4 platform, like AvaTrade, allow their clients to use expert advisors for automating their trading strategies.

UK shares purchased as a CFD are not liable for the usual 0.5% stamp duty that is payable with a traditional share purchase (take note that tax laws can change and are subject to individual circumstances).

Unlike the traditional brokerages that just offer stock trading, CFD brokers, like the brokers featured above, provide access to a broad range of instruments like stocks, commodities, and currencies.

Disadvantages:

As was mentioned, leverage is a double-edged sword. It can magnify both the gains and the losses. And as with all trading, traders are at the risk of the markets moving against them.

CFD brokers typically charge an overnight fee for holding a long position overnight. This overnight fee is essentially the cost of borrowing the money from the broker to purchase the shares on margin. There would not be an overnight fee if you closed the position on the same trading day. Therefore, this would only be a disadvantage if you aren’t a day trader or an intraday trader.

For additional information on trading stocks as a CFD, visit our page “The Basics of CFDs“. It’s important to remember that leverage can work both ways and it can magnify gains and losses.

London Stock Exchange: Key Stats and Background Information

LSE shares are currently priced at £3,483.85, after opening the day at £3,469.00. As of 04/06/2017, London Stock Exchange has 348 million shares available. This amount brings their market cap to £12,138 million.

This market cap makes London Stock Exchange the 40th largest stock on the FTSE 100 index by market capitalization. In the past 30 days, the LSE shares price increased from £3,390.00 by 2.77%. In the past 90 days, it rose by 12.24 %, from £3,104.00 to the current price of £3,483.85.

Regarding the trading activity, London Stock Exchange is the 92nd most actively traded stock in the FTSE100. It has an average of 451,070 shares that are being traded per day.

London Stock Exchange had a profit after tax for the financial year ending 31/12/2015 of £288 million. This amount was an increase from £131 million for the financial year ending 31/12/2014, an overall 120% change in profit after tax.

London Stock Exchange was listed on the London Stock Exchange on July 20, 2001, and can be traded on Monday-Friday between 8:00am and 4.30pm GMT (UK time).

London Stock Exchange paid a dividend of 33.30p in 2016, an increase from 20.70p in 2015.