How To Buy Stocks In Canada: Steps And Everything You Need To Know

Are you searching for how to buy stocks in Canada? Or how do I buy stocks in Canada? Almost everyone may have heard the word’ stocks’ before, even if they are not into investing. 

Investing in the stock market is one way people make thousands of dollars and attain the financial freedom they used to dream about.

Stocks refer to parts of a company that are sold to the public. When you purchase stock in a company, you become part owner of the company until you finally sell the stock for either profit or loss (this is why you need to do your homework well before you buy a stock). 

Once you purchase the stock, you become financially tied to the company whose stock you purchased and will experience both the successes and failures of the company along with them. 

Do not let that scare you; once you do your homework and study the company you are interested in before purchasing the stock, you will minimize the chances of losses. 

One thing to remember is that stock investing is all about taking calculated risks. There is nothing like a sure banker.

In today’s in-depth article, we will look at how you can purchase stocks in Canada safely and make money. 

We will also examine how you can choose a broker suitable for your trading style and optimize your portfolio. 

What Is A Stock?

A stock represents ownership in a company. As a shareholder, you share in its profits and losses.

How To Buy Stocks In Canada

It may seem unsafe when purchasing stocks in Canada, especially if you are a new investor and this is your first time buying a stock. 

Technology has improved almost everything today, and stock investing was included. 

With the numerous apps available today, you will be on your way to buying your first stock in no time.

But it is not hard at all. As long as you follow the correct procedure, you can purchase your first stock in no time. 

You need three important things before you can start trading stocks. These are a broker, money to buy the stocks, and an idea of the kind of stock you want.

Let us look at the proper procedures when buying stock in Canada.

Establish The Correct Accounts 

Before you start buying stocks in Canada, you must have a brokerage account allowing you to purchase the stocks. 

Self-directed investors open an online brokerage account to buy and sell their stocks independently. 

Depending on the brokerage firm you choose, there may be some fees for using these broker accounts. 

You can also decide to have some expert trade your money for you. This is usually the option taken by people who need to learn how to trade and need more time to learn. 

If you make this decision, you should ensure that the person or company you choose has extensive experience and success in stock investing. 

Choosing this method comes with higher fees compared to when you trade on your own. 

Familiarize Yourself With The Stock Exchanges In Canada

The next thing to do is get to know Canada’s stock exchanges. This is very important. These are the stock exchanges in Canada where you can buy and sell stock. They are: 

• Nasdaq CXC 
• Toronto Stock Exchange (TSX) 
• TSX Venture Exchange (TSXV) 
• Montreal Exchange 
• The Canadian Securities Exchange (CSE)

Reading Stock Charts

Even if you are not going to be trading the stocks on your own, you should still be able to know how to read a stock chart. 

This will help you track how good or bad your investments are faring. You can do this by understating the stock and the various terms used in stock trading. Some of these terms are:

• Ticker: the name of a company in abbreviated form. The ticker symbol is used to identify companies on the stock exchange. Example: Apple is AAPL.
• Volume: number of shares traded within a particular period.
• Bid/ask price & spread size: refers to how much sellers are willing to stock for and how much buyers are willing to buy a stock. It is determined by supply and demand in the markets.

Research On The Stocks

The next step is to research some stocks you intend to buy. You can begin this by reading the annual reports released by the company and any other reports you can get. 

You would research how the company’s products are faring on the market. 

Choose Stock Order Type

We have three main stock orders: market, stop and limit:

• A market order indicates that the investor is ready to accept the market price the stock is sold for. This allows your trades to take effect immediately. 
• A stop order allows investors to set the exact price they will be willing to buy or sell their stocks. This order is not visible to the market. Exchanges in Canada will only allow a limited order. However, exchanges in the USA allow both stop orders and limit orders.
• A limit order sets the maximum price an investor will pay for the stock and the minimum he is willing to take. This will cause your trade to sit on the exchange until it gets filled after meeting your price requirements. It can also either expire or get canceled.

Optimizing Your Trading Portfolio Over Time

You cannot pick winners in the stock market all the time. You need to find out if this is going to be a winner or not. 

Most traders obsess over this and lose more trades instead of winning. No matter how seasoned they are, one cannot even time the market. 

Short-term fluctuation will occur over time, and the trade will increase or decrease. 

Due to this, most successful traders ensure they get the most out of their trades by optimizing their trading portfolio. 

This means they diversify their investments and not just put all their money into one stock. 

This is better done when the stocks are chosen from different industries and sectors, helping you maximize your investment. This is necessary for your stock trading journey.

You can also invest in ‘exchange-traded funds or ‘mutual funds.’ They are mini portfolios of stocks and several other investors.

Keeping Tabs On Your Stocks

It is important to carefully monitor your stock portfolio to track the performance of your investments. The frequency of your portfolio reviews depends on your investment strategy.

Experienced traders who frequently buy and sell stocks may review their portfolios every day. On the other hand, long-term or buy-and-hold investors who prefer to hold their stocks for a longer period may only review their portfolio every month.

How To Open An Online Trading Account

You will need the following to open an online account

• Social Security number
• A home address
• Employers’ number 

The minimum amount of capital you can open an account with will depend on the broker. 

Some brokers only permit you if you have at least a $1000 capital. 

Some brokers also offer commission-free trading. This means that you do not pay the broker anything to execute trades. 

They make their money elsewhere. Some brokers also have people who execute the trades and will charge commissions. 

You will also have to choose between a tax-free savings account (TFSA), a registered education savings plan (RESP), and a registered retirement savings plan (RRSP).

How To Buy OTC Stocks In Canada

OTC stocks mean ‘over-the-counter stocks. They are not traded on centralized exchanges but through networks by broker-dealers. 

They are usually cheap to buy. However, they are typically not regulated. Here is how to buy OTC stocks.

How To Buy Stocks In Canada Without A Broker

You can purchase stocks without the help of a broker. Some investors purchase their stocks directly from the companies they are interested in. 

They do not use brokers. This can be done through Direct Stock Purchase Plans. 

If you are not using a broker for whatever reason, you can purchase stocks directly through the Direct Stock Purchase Plans from the companies.

How To Reduce Stock Purchase Risk

There will always be risks in stock trading, which you can never escape. If you do not like risk, then it will be better for you to look for some 9-5. Once you decide to trade stocks, you will always deal with risk. 

However, there are some ways through which you can reduce the risk. There are some of them below. 

Diversification

You can reduce risk by holding different investment assets in your portfolio. 

You should only put some of your money in one stock. This helps you to reduce your risk without sacrificing your returns. 

However, you should also diversify only a little. That is, putting too many different assets in your portfolio. Be moderate.

Holding Less Risky Assets

Another way to reduce risk is by holding stocks with less risk. This way, the risk of a loss is minimal. 

You should also bear in mind that such stocks typically bring low rewards. They go hand in hand. 

How To Make Money From Stock Trading

There is no particular way to make money from stock trading, and anyone who tells you they can do that is probably looking to dupe you. 

Anything can happen in the markets. However, one proven way to increase your chances of making money is by holding the stocks for extended periods. 

After conducting adequate research and gathering factors to support why you bought that stock, that is. Stock trading is a long game. 

If you want money to pay a loan shark, you should look for a better place than stock trading. 

When To Invest In The Stock Market

There are some stocks that only the rich can buy because their prices have increased due to how valuable the company has become, with some trading above $1000. 

Some of these companies are Amazon, Apple, and Alphabet. However, one can purchase part of a fractional share for less than the price of the actual share. 

When to trade depends on how ready you are to attack the market and the availability of your capital.

Stock Investment Age Requirements In Canada

Entering the world of stock investments in Canada is not child’s play. 

Rapid gains can be counterbalanced by equally swift losses, and if you’re contemplating investing without thorough research, you might as well consider gambling at a casino. 

Therefore, the prerequisites for engaging in stock investments demand an investor to reach the age of consent. 

The age requirements to open a trading account in most Canadian provinces necessitate you to be either 18 or 19 years old.

Those who are yet to reach the age of consent but have a keen interest in initiating their journey in stock investments may consider seeking assistance from their parents. 

If there’s a particular company you have faith in, you could request your parents to acquire the shares on your behalf. 

This could be in the form of a unique birthday gift or they could establish a trust account to maintain these shares until you attain the prescribed age. 

If fortune favors you, these shares could potentially elevate their value significantly by the time you become the account’s official custodian.

Things To Look For Before Purchasing A Stock

Picking a stock is not easy, and some professionals who are paid to do that even fail. 

When you buy a stock, you are buying it from another person, although you do the purchase from your electronic device. Some things to look for are:

All these will require extensive research. 

How To Buy Stocks In Canada TD Bank

To buy stocks through T.D. direct investing, you will need to do so through the brokerage platform for T.D. Bank. 

There are no minimum requirements to trade, and traders can take as many as 150 trades in a day. Here is how to trade with the T.D. broker app.

Frequently Asked Questions

Conclusion

So that is how one can buy stocks in Canada. This article shows how stocks can be purchased, what must be done before purchasing, and how to trade OTC markets.

With this newfound knowledge, you are closer to purchasing your first stock. If you are also thinking of insuring your properties, then we recommend Sonnet Insurance, you can click here to read our guide on everything you need to know about Sonnet Insurance.