Whether you’re an investor or trader, you’ll have to use tools to make good decisions. Some platforms offer tools within the platform itself, others don’t.
In this article, I’ll be showing you some of the tools that platforms offer. And for those investors that are using a platform that doesn’t offer any tools, I’ll be showing you some free tools available on the internet. There are hundreds of trading platforms in the world and it’s not practical to show you the tools every trading platform provides. So, I’ll be focussing on a few only.
Hargreaves Lansdown: Good all-rounder, but doesn’t do anything exceptionally well
The information laid out by Hargreaves Lansdown (HL) is very easy to follow. I also like how anyone can use the site for their research – customers and non-customers alike.
The financial information provided by HL is very detailed and you’d probably have to get a company’s annual report to get anything more detailed.
Notice how I’ve put a box around the ‘financials’ and ‘net interest’ bits. This is the main reason I use HL: to see how much, if any, of a company’s income is from interest. You should be aware of what shariah scholars say is a tolerable amount of impermissible income.
One of the biggest advantages of using HL is that it offers tools that the free platforms don’t offer (or only offer partially), such as limit orders and stop losses.
Also, unlike Google, it’s possible to see a graph with a 10 year time span. There’s also a tab that says ‘HL Research’, but there’s rarely any information on that tab.
There’s an option to create a watchlist or an alert. An advantage of using the HL alerts is that you’ll only be alerted to stock-specific information. In contrast, using the Google alert service allows you to identify key words, and when those key words appear in the news section, you'll get an email alert straight to your inbox. Just a word of caution: choose your keywords carefully, otherwise you'll be inundated with emails! One of the stocks I was keeping an eye on using this method was Eventbrite. Every time a news story reported there was an event going on using the Eventbrite ticketing platform, I'd get an email about it. Sometimes it's better to use the ticker instead of the full name.
You may also be interested in checking out the HL review.
eToro: Good tools, but only for customers
eToro offers some excellent tools, but only for customers. The tools available are far more in-depth than what free websites offer, but a lot of the time it looks more complicated than it actually is. At the end of the day, every chart you see is someone’s way of showing data in a visual form. The most important thing is that you understand what the underlying data is trying to show.
If you’re an eToro user, the first thing you’ll be shown is the watchlist when you log in. All trading platforms have a watchlist facility, but what’s interesting about the eToro one is that there’s a “sentiment” bar attached to each stock. This tells you if buyers are mostly looking to buy or sell a stock. Now, if the sentiment is that 100% of investors are looking to sell, then one could expect the stock price to go down.
The 52 week gauge is also a nice touch. It shows the lowest and highest price a stock has reached, and it the small marker (often somewhere in the middle) shows the current price of that stock.
All of these things can be seen in the red rectangle(s) in the image below.
eToro also provides graphs, which provide a combination of simplified and more complex charts. This includes financial data. I strongly recommend you obtain the company accounts documents to go over financial data because what eToro and others mostly offer is a snapshot of the data. If that is not possible for any reason, then at the very least you should be using data from HL because out of all the free-to-use resources, their data is the most detailed.
eToro really comes into its own with the next tool they provide: candlestick graphs. These are a favourite amongst traders and show open, close, highest and lowest price points on a single icon. Given that MuslimShareTrader website is aimed at the beginner investor, a discussion on how candlestick graphs work is probably not appropriate in this article.
But if you were curious and wanted to check out this feature, you’d have to press the “chart option”, and to see more advanced options, press the expand icon. Both of these options are shown in the red rectangle boxes.
You may also be interested in checking out the eToro review.
Google Finance – excellent to use if your platform does not offer any tools
Perhaps your trading platform doesn't offer any tools (which may be a likely scenario if you are using a free or low cost platform). Still, this is not a big problem because there are so many free tools out there.
One of the most popular tools out there is probably the graph resource that Google Finance offers. To access the graph, simply type in the name of any company (or company ticker) you wish to look into along with the words “share price” into Google's search engine. So let’s say you wanted to look at Superdry, the fashion company, you’d have to type “super dry share price” into Google. From the search result, you will instantly get some useful information. You’ll also get the option to delve a little deeper.
The screenshot below shows information about Superdry. Notice how I’ve highlighted certain parts in a red, yellow, brown, pink and orange rectangle rectangles. Google have managed to get a lot into a small graph. Let’s go through these things one by one.
Red rectangle box
The red rectangle highlights the nature of the company; in this case, it says “women’s clothing and fashion store.” There is nothing inherently haram about clothing and fashion, so you can continue researching this company to make sure it meets shariah and commercial screening criteria. Importantly, just because there is nothing inherently haram about it, it may still be haram on other grounds, which means it needs to be researched further.
But suppose it were to say ‘pub company’ or similar, you would know not to spend an additional second researching this company for the purpose of investment. As a Muslim, this really should be a very basic thing you do.
Purple rectangle box
The “open” refers to the price shares were fetching at the start of the stock market trading session whereas the “prev close” refers to the price the shares were trading for at the end of the last trading session. “High” refers to the highest price the shares reached for that day, and “low” means the lowest it reached. Similarly, you’ll see a “52-wk high” and “52-wk low” which shows the highs and lows of the stock price in in a year. This helps to give an idea of how volatile a stock is. For people that don’t like volatility, these two numbers should be close together.
The high and low prices are not particularly important for investors because they are not bothered about small daily fluctuations – they are in it for the long run and therefore the “dividend yield” is more important to investors. This is a financial ratio (dividend/price) that shows how much a company pays out in dividends each year relative to its stock price. Obviously, investors want this figure to be as high as possible.
The “mkt cap” refers to the market capitalisation of the company. In this case, Superdry is worth £180.38 million.
This box will give you a snapshot of a company. You can than delve more into it with more thorough research tools.
Brown rectangle box
The brown box is drawing your attention to the graph timeframe. For some stocks, it’s possible to see stock prices that go back as far as the eighties!
When I consider a stock, I specifically look at the five year stock price. I will glance at the longer and shorter term graphs, too, but I’m mostly interested in the five year graph. There are a few reasons for this:
1) If a company cannot provide at least five years of share price data, then sometimes it means it is a pretty new business. And new businesses are more of a risk.
2) If a company can provide a 15 or even a 20 year graph of its share price, it’s obviously been around a long time. However, the economic landscape does not stand still and often undergoes changes in cycles. Over a 20 year period, the economic landscape would have changed so drastically that some parts of the graph may be irrelevant. To prove this point, consider the company Nokia. In 1998, it was the largest phone maker in the world (and one of the most valuable companies in the world, too). But within 10 years, competitors were aggressively eroding its market share. The landscape had totally changed. The hardware and software technology had changed and so, too, did the network technology. Nokia, unfortunately, had not moved with the times, and as a result, had been left behind. A period of five years can be enough to usher in completely new technologies and alter how we live and work. The likes of Facebook/ WhatsApp and Uber, for example, have helped change the social landscape in a relatively short time frame.
3) I also use the five year graph to get an idea of the average share price. The stock market can be very sensitive to news - both good and bad. Take Boohoo as an example. One single newspaper report was all it took to tank the share price some 40%. It took a few weeks to recover somewhat. One-off events can cause huge fluctuations in the share price, but quite often the price recovers to justified levels soon enough. Using a five year average share price gives a more realistic value of a company and helps to contextualise wild swings in share price due to one-off events.
Fluctuations within the graph are to be expected. But it’s the drastic changes we need to look out, and account, for. In 2020, that’s easy. The global pandemic caused almost all stocks to decline, but could there be anything else behind the movement? In the pharmaceutical industry, for example, a disappointing drug trial can cause share prices to go down. It’s interesting to learn why a stock shoots up. But what you really need to concern yourself with is why a stock shoots down. The former makes you money, the latter loses you money.
Also, we need to observe the general trend of the graph. If it’s been declining for the last five years, you have to ask how likely it is you will make money with that particular stock.
In short, for me, a five year graph shows enough history to give me confidence, yet shows a company’s realistic value.
Yellow rectangle box
The yellow box is drawing your attention to more tools and resources.
For example, if a stock has suddenly shot up or collapsed, you’ll want to know why. This is where the ‘news’ button comes in handy. Once you click it, you should then click on the tools button and rearrange the news stories so that the newest articles are at the top. Sometimes it’s possible to see news stories that are less than an hour old.
Also, if you click on the ‘finance’ button, you’ll have access to a few more tools (more on that later).
Pink rectangle box
The ‘follow’ button is a bit of a hack and makes your life so much easier. If you’re logged into your Google account and then press ‘follow’, it will put that stock into your list of stocks. You can follow a very large number of stocks. This is useful because the next time you’re on Google Finance, you can click the ‘my stocks’ button and all your pre-followed stocks will be there in one place along with the current price and the change in price as a percentage.
Lesser known tools within Google Finance
Considering Google Finance is a free-to-use site, I find it amazing that so many tools are available. The comparison tool, for example, is handy when you want to compare one stock with another. So, to continue with our example, let’s say you wanted to add only one fashion stock to your portfolio and after your research you narrowed it down to just two stocks (unfortunately, it’s only possible to compare two stocks with this tool), you could conduct a comparison.
To continue with our example, let’s say the two fashion stocks under consideration are: Superdry and Ted Baker. The comparison tool lets you pit one stock against another and see the performance graph for a range of timelines. However, do note that you’ll only be able to see the comparison in percentage terms, and not share prices.
There’s also a ‘financials’ section, however I would not recommend using it. As s Muslim, it’s necessary to try to establish how much money a company might have earned from impermissible sources. Really, this requires a more detailed income statement, not an overview of the quarterly financials. This is explained a bit later on.
Conclusion: Which website has the best tools & resources?
This is difficult to answer because ‘best’ is a subjective term. However, I will say this: if I had to use only one site, it’d be the Hargreaves Lansdown website. It does everything competently, but most importantly, it has the information needed to work out if a stock is halal or not.
A lot of the information is not updated real-time, such as news stories and director deals. For this, other sites are better. But the best resource HL offers is the 'financials' resource.
Learning about the tools available to make you a better investor is important, but this is just one element. If you would like to learn more about the stock market in a structured way, consider joining the free 30 Day Trading Programme aimed at beginners, where you'll learn about the Islamic and commercial aspects of investing.
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