If you are a beginner in the stock market in France but willing to grow and diversify your portfolio, then you are reading the right blog as we will explain the basic steps to buy stocks online.
Table of Contents
How to buy stocks online?
To place a stock order with a broker, you typically follow these steps:
Choose a Broker
Select a reputable broker that suits your needs and offers the order types you require. There are multiple online brokers in France. You can read our blog about best brokers in France.
Open an Account
Open a trading account with the chosen broker. This may involve submitting necessary documentation and funding the account. Normally you will be required to prove your identity (passport, ‘carte de séjour’, carte d’identité..), your address (a utility bill for example), bank account details, photo, etc.
In France, you will be asked to take a financial knowledge test before being able to pass any order. This is a legal pre-requisite defined by the AMF. It could be boring, but it is important as it will protect you from managing financial products that you do not understand.
Research and Identify Stocks
Conduct thorough research to identify the stocks (or ETF) you want to invest in. Consider factors such as company financials, market trends, and analyst opinions. You can delegate on your bank or financial advisor to manage (‘gestion pilotée’) in exchange for a fee (from 1% to 3%). You can learn more in our blog about how to invest in France. A simple tool we use to find stocks is Yahoo finance.
Be sure to select the right ticker or stock value when searching for it in your broker account. Some companies have similar names and you may select the wrong one (ex: Schneider Electric vs Schneider National). Or sometimes the market brand differs from the official company name (ex.: Google official name is Alphabet, or for Facebook is Meta).
You can find stocks through its ticker symbol, a one- to four-letter mnemonic assigned to a particular company. MSFT, for instance, is the ticker for Microsoft Inc. Even better, to be sure that you have selected the right one, you may want to use the ISIN code instead (example: US5949181045 for MSFT).
Notice that you a single stock value could be traded in multiple stock exchanges. For example a ‘company A’ could be traded in Paris EURONEXT, or in London LSE, etc. Some brokers will select this automatically for you.
Book your order
Depending on your investment strategy, choose an appropriate order type. Common types include:
Market Order (au prix du marché):
Buy or sell a stock immediately at the market price. You may use this order type when you are ok with the actual stock price and want to secure your order (it will be executed immediately / high priority if the market is open).
Limit Order (À cours limité):
Set a specific price at which you want to buy or sell a stock. The order will only be executed when the designated price is reached. This order type makes sense when you want to buy a stock at cheaper price but you do not have time to keep looking at the screen the during the day.
Stop Order (vente stop):
Similar to a limit order, and known as well as ‘Stoploss’ but it is set to buy or sell a stock when it reaches a certain price (stop price) following a specific direction. We use this order type mainly to sell and when we want to protect our capital from a stock that drops significatively and sell it
Stop-Limit Order (vente stop limité):
A combination of stop and limit orders. It becomes a limit order when the stock reaches a certain stop price.
Some brokers has another option called ‘meilleure limite‘ and this one is similar to market order but will take into account the order book (explained below).
Finally, we recommend the training videos from Degiro if you want to learn more about order types.
Check the order book (‘Carnet de commandes’)
When you select the stock ticker that you would like to trade, you’ll be met with a price quote, a set of information about the stock price and activity. This will show you the last price at which the shares traded, as well as a BID and an OFFER.
The bid is the highest price at which somebody in the market will buy a share (and thus is the best price at which you can sell to them). The offer, or ask, is the lowest price at which somebody in the market is willing to sell (and thus, it’s the best price at which you can buy from them). The difference between the bid and offer prices is known as the spread.
A narrower spread typically indicates that the market for the stock is quite active and liquid. A wider spread indicates the opposite. What we normally do, is after considering the price quote, we place a limited order as per the lowest bid amount. It helps us buying few cents cheaper.
Finally, if you are checking a stock value after market closure, Knowing the order book tells you an indicator of the market evolution.
Here an example:
Determine Order Duration
Decide the duration for which your order will remain active. Common options include:
a. Day Order: Valid for the trading day and expires at market close if not executed.
b. Good ‘Til Canceled (GTC) Order: Remains active until executed or manually canceled. Notice that sometimes this orders can be cancelled by the market. So it is good to check time to time that they are still valid.
c. Extended Hours Order: Some brokers offer the option to trade outside regular market hours, usually with limitations.
Place the Order
Finally, once you selected your stock value, defined the quantity, price, order type, duration, then you are ready to click on BUY button.
Notice that your order will be executed while the stock market is open. So if you place an order sunday night, it will be executed next working day (monday) if your order conditions are met.
Key points to consider when placing a stock order
– Understand the risks and potential rewards associated with stocks you are considering.
– Consider transaction costs, commissions, and fees charged by the broker.
– Stay informed about market conditions, news, and events that could impact your chosen stock.
– Use limit orders if price accuracy is important to you, rather than market orders which execute immediately.
– Set realistic price targets and stop-loss levels.
– Regularly review and monitor your open orders to make any necessary adjustments.
It is recommended to consult with a financial advisor or do thorough research before investing in stocks.
myFrenchMoney tip!
We try as much as possible to avoid buying stocks at its market price. Instead we use 'limit order' type. We normally check the price evolution in a chart and define a price as per the last days evolution. If we are ok with actual price, then we set best limit or 'meilleure limit' order type. We privilege our PEA for european stocks and our standard broker for international.
Final words about buying stocks online
It may look cumbersome to buy an stock, with multiple variables to manage. It is true that there is a lot of jargon and unnecessary complexity but once you understand the key points, you will get familiar quickly.
Our main lessons learnt from buying stocks directly are:
- Setting automatic transfer and orders. It simplifies a lot our life setting recurring deposits into our brokerage account to increase your portfolio liquidity on a regular basis. Some brokers (Interactive brokers, Revolut) allows us to plan our orders.
- It is important to learn how to invest. We wanted to start fast at the beginning of our journey and made costly decisions buying sometimes at a bulle peak. Take it slowly and educate yourself, specially on fundamental and technical analysis. The first will help you choosing the right values, and the later knowing when to buy or sell.
- Order transaction fees are cheaper (regulated at 0,5%) if done within a PEA wrapper.
- Learn more in the official AMF site
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Please remember that we are not financial advisors. We are just sharing our best understanding based in our own experience. This blog is for educational purposes only. Do not make investment decisions solely based on what you read in this blog. What works for us, may not for you. Do your own research and look for professional service if required. Read our full disclaimer in the ‘about’ page.s
