What is an Online Trading Account?
In the past, stock trading was only for the wealthy. But now anybody can trade stock. What's more, you don't have to hire someone to do your stock trading for you. You can trade stock for yourself if you have an online trading account. All you need is a computer, Internet access, enough money to start your own online trading account, and the willingness to learn about trading.
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Definition
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An online trading account is an account that you access online where you can keep money available to do your own stock trading or investing in other investments.
Types
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There are cash accounts, IRA accounts, margin accounts, options accounts or forex accounts. The cash account is a basic account where you have cash that you use to buy stocks, bonds, mutual funds or options. The IRA account is for you if you want to set up a retirement account. Margin accounts allow you to borrow from the online brokerage against the cash and securities in your account. Options accounts allow you to trade options which are more volatile and risky than stocks. Forex accounts allow you to trade currencies using your online trading account.
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Identification
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You can access online trading accounts at the website of a reputable online broker where you can deposit money to open your own online trading account. It is important that the broker holding the money is a reputable online broker. The broker should be registered and should have also been in business for at least five years. There are sites such as Keynote and Smartmoney which rate brokers based on customer service response time, trading tools and other issues. Looking at such sites can help you make the best choice of online broker for your trading needs. Well known examples of online brokers include Ameritrade, Scottrade or E-trade or Interactive Brokers.
Types of Information
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If you have an online trading account, some brokers provide electronic confirmation statements every time you do a trade, they provide record keeping that is helpful for tax preparation, they provide real-time account updates, and they provide graphs and charts or other information that helps you analyze stocks based on past market data, past price and past volume of stocks, the financial statements of a company, company management, the company's competitive advantages, competitors and markets.
Potential Trading Practice
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Many online brokers offer the opportunity to do practice trades which are computer based and which do not involve real money. And so you can do paper trades or practice trades that do not involve your own money. The value of this is that doing practice trades helps you gain confidence so that when you're ready, you feel more able to trade your own money.
Costs
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Usually there are trading fees associated with having an online trading account. There is a cost associated with each time that you buy or sell a stock, bond, mutual fund, options, or forex. The trading fees vary from broker to broker. At some brokers the cost per trade is low such as perhaps $7 per trade or lower whereas other brokers may have higher per trade costs.
Account Fees
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Some brokers charge account maintenance fees or have a minimum balance that you are required to keep in your trading account at all times.
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