About Trading Accounts

Trading accounts are similar to bank accounts, but unlike traditional bank accounts, a trading account can hold not only cash, but securities like stocks and mutual funds as well. There are many companies offering trading accounts with a variety of different services and features. Knowing your needs will help determine which company is right for you.

History

The earliest type of organized trading dates back to the eleventh century. The New York stock exchange that we know today began in the late eighteenth century. Before the Internet, trading took place at the office of a stock broker. Detailed information and data about the markets was expensive, and the high commissions necessary to buy even a small amount of shares made it difficult for the average person to be a savvy investor. Today's world of low-cost online trading and an overload of information has leveled the playing field.

Features

There are many different features available when comparing trading accounts. Some brokers offer streaming quotes. Depending on how active a trader you are, you may even have access to the level II quotes that the professionals use. Quality market research is another feature of trading accounts that varies from broker to broker. Some brokers offer additional professional data and research for an extra fee.

Considerations

There are many important considerations to keep in mind when you are thinking about opening a trading account. Fees are a prime considerations. Trade commissions vary from broker to broker. Some brokers charge lower commissions for more active traders. Account minimums are another important factor. Some brokers require a large deposit, often thousands of dollars, to open an account. Some require no deposit or amounts as low as $500. Choose a broker who will be there to answer your questions and provide you with detailed information.

Warning

It is important to be aware of the tax implications of your activity in a trading account. If you profit from a sale, you will be required to pay capital gains taxes. The amount of the tax will vary depending on your tax bracket and the length of time you held the security in your account before selling it. Luckily, most brokers offer detailed information to help you determine your tax liability.

Effects

Trading accounts have leveled the playing field for personal investing. The tools available with even budget brokers are more than powerful enough to make you an informed investor. Low commissions make buying even small quantities of stock a possibility. Many forums and groups allow you to discuss investment strategies.