Finding the right brokerage account doesn’t need to be difficult. Start out by deciding what kind of strategies you’d like to employ. Do you want to long, short, play options? You can do all three or focus on one.
Deciding how you want to use it helps you determine which kind of account as well as which broker to use.
HOW TO OPEN A BROKERAGE ACCOUNT
There are quite a few brokerage firms to chose from as you’re learning how to open a brokerage account. TD Ameritrade, E*Trade, Fidelity, Robinhood, Charles Schwab and Interactive Brokers to name a few.
The first thing to consider when you want to open a brokerage account is what type of investor are you? Are you investing for retirement or will you be living off these investments?
If you’re opening a cash account because you want that money now, you don’t get the tax breaks an IRA would have. Taxes on profits as well as dividends may apply. Although you can withdraw money from there any time you’d like.
Cash accounts are also eligible for margin. Margin lets you borrow money.
If you want to short a broker like Interactive brokers would be a good one to open an account with. Read our Interactive Brokers review. If you’re into options then TD Ameritrade or Charles Schwab is a great broker to consider.
As stated earlier, the way you want to use your brokerage account will help to determine which firm to go with. There are many ways to profit and you may have to get approval for some, such as options.
HOW TO OPEN A BROKERAGE ACCOUNT – FEES, COMMISSIONS, AND TOOLS
Commissions seem to be taken into great consideration by a lot of traders. It’s true that commissions from brokerage firms vary, some are cheaper than others.
Paying a higher commission price isn’t necessarily a bad thing though. The less commission you pay, the more bare bones a broker can be. Commissions pay for upkeep as well as having the best tools at your disposal.
Compare commission fees as well as incentives. See what you’re comfortable paying. Although, if paying a higher commission isn’t something you can handle, you may not want to be trading at this point in time.
Brokers may also work with you in lowering commissions. Call customer service and ask them. You might be surprised.
Trading platforms are make or break in trading. Many brokers offer different trading software along with mobile trading apps. A slow platform will hurt you. A mobile app that doesn’t work well is detrimental.
As stated above, commission fees can be correlated to how well a platform works.
HOW TO OPEN A BROKERAGE ACCOUNT – ACCOUNT MINIMUMS
One thing to know as you learn how to open a brokerage account, a lot of brokers require a minimum amount to open an account. This can affect which platform you choose.
They range from $0-$10,000 minimum. If you’re learning how to invest in the stock market with little money, then a broker that requires $2,500 or $10,000 might not going to work.
This cuts down on trying to pick a broker. The good news is there are options that give you bang for your buck. There are many great brokers that don’t require a large minimum to open a brokerage account.
HOW TO OPEN A BROKERAGE ACCOUNT – APPLICATION
An application is required to open a brokerage account. You can apply online in most cases. They may require you to sign some stuff if you’re requesting margin or options.
Have a fax machine handy. They usually ask for a faxed copy of a drivers license. If you chose a broker that has offices in your area, you can head in there and supply that information.
Once you’re approved the fun begins. You get to fund your account. Now you’re up and running. Before you go crazy trading, use a simulated account. This is important!
HOW TO OPEN A BROKERAGE ACCOUNT – SIMULATED ACCOUNTS
Learning how to open a brokerage account is just the first step. A broker that allows paper trading is so important when you begin stock trading training for beginners. Simulated accounts allow new traders as well as seasoned ones to practice. Even a season trader can learn a new strategy.
Trading is emotional. Winning gives you a high but losing brings a crash that can cripple some. Finding a broker that allows you to practice teaches you how to deal with those emotions without blowing up your account.
Trading isn’t just about buying and selling. The market is a war between buyers and sellers that form candlesticks. Those candlesticks, in turn, form patterns,.
Patterns are what traders trade. As a new trader, if you can’t find and read patterns, you’ll lose your money to the seasoned traders. You need to know what spinning top candlesticks are as well as shooting star patterns.
You need to know the difference between market order and limit order. A paper trading account is such a great tool to learn the ins and outs of trading. It’s so much more than buying and selling.
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