Setting up your stock trading account at a broker is, for the most part, easier than setting up a bank account. You are asked to provide a series of personal data, ranging from full name to physical address and such. From one brokerage firm to another, the process may be a slightly more complicated one, depending on the services they offer and the fees that are incurred for them. Instead of relying on advertising or tips from others, you can read this step by step guide to find out how much you stand to gain (or waste) from paying attention to the platform of your choosing and being in charge of the decision.
Step 1 – Managing your personal resources
The single most important aspect about trading pertains to your funds. Financial advisors involved in stock trading recommend that you have two separate funds: one for investing and one for savings. Typically, your savings account should hold at least 6 months’ worth of expenses, to which you add consideration things that are very likely to happen in this period of time, such as child expenses, healthcare taxes or employment in a volatile economy. The other account should be solely dedicated to investing – nothing else goes in – much like your vacation money. Once it’s done, you have to wait for next year or, in this case, until you can spare enough funds without jeopardizing your savings account. Some people view this as an extreme measure, but what would happen if you had lost all of your liquidities? Would you be able to survive without harsh compromises? Especially when you are involved in stock trading, currency exchange or any form of exchange online, setting up these boundaries is not only advised, but necessary.
Step 2 – What do you want to trade and how?
The second step to setting up an account at a brokerage firm is to decide what type of services you are looking for. Are you too busy to waste precious hours reading news and learning about currency exchange or, on the contrary, are you a person with enough time to roll up their sleeves and dedicate to this endeavor for the next couple of years? If you fit in the first category, full service brokers are what you’re looking for. These brokerage firms offer complete packages for your account, which will be kept in check by an individual. Commonly, you will be appraised by this person about your financial status and, depending on their financial and stock trading experience, they can give you tips as to what may be the right moves to make. It’s just as likely that you may be advised to hold out on potentially profitable trades, but that’s part of the job description.
On the other hand, online discount brokers are perfect for people who want to perform the trading themselves. Reducing the costs of a full-service platform, online discount brokers make it possible to start investing with a relatively small amount of money, while keeping you safe from enormous trading fees. Every online discount broker has their own policies, services, tools and regulations. These four dimensions are crucial to your decision to set up an account, as they can determine how effective you will be in your trading career.
Furthermore, not every online stock trading brokerage makes it possible to trade everything, while some may charge extra for “exotic” trades (operations that are rarely requested by other users). Consequently, you’ll also have to decide whether the foreign currency exchange market or the stocks of transnational corporations is your preferred area of trade. Maybe equity is not your cup of tea. Commodity prices are the subject of millions of trades or, if you want a less risky path, bonds are an amazingly safe investment, but with considerably fewer earnings as well.
Step 3 – Choosing between online stock brokers
Now it’s time to figure out which services you are willing to give up and which you can’t live without. If phone assistance is something you’re used to, narrow your choices down to 4-5 online stock trading platforms and test out their responsiveness and quality of service. Online discount brokers have superior prices in terms of the fees you’ll be requested to pay, since most of them don’t have hundreds of people managing thousands of accounts. Nonetheless, the types of charts, data analysis and real-time information you receive, as well as the form in which this is presented varies between online stock trading platforms.
For this particular aspect, you’ll have to spend some time researching and learning about stock trading, currency exchange and the possibilities of online stock trading. Without a notable investment of time and effort on your part, it’s likely that your choice will be a misinformed one, guided by marketing strategies or good public relations. While this is in no way detrimental, it may prove consequential in the long run. Moreover, online discount brokers have personalized regulations. Brew some coffee and go through them, making sure that you thoroughly understand what the rules are about. If you’re in doubt, do more research or consult your financial advisor – when you trade stocks it’s better to pass on an opportunity altogether than to make a bad decision because you’re in a hurry. There’s always money to make on a better deal if there’s something hazy about what’s sitting in front of you.
Step 4 – Rule out non-competitive online discount brokers
By exclusion, rule out each of the online brokers you’ve shortlisted for your first online stock trading account. From taxes for services you never plan on using to ambiguous regulations and even trading platforms that are not up to par, it’s better to go on a good platform at a respectable online discount broker rather than subject yourself to the possible negative experiences of a great platform with bad guidelines.
Last, but not least, most websites will ask you to establish what type of account you desire, based on what and how you intend to trade. This is usually evaluated from low risk to high risk tolerance, the first of which includes conservation of capital, income and growth, while the last is reserved for speculative investments. If you don’t understand speculative investment trading and wish to engage in them, then it’s best to do some more reading before going any further.