How to Open a Trading Account at a Brokerage Firm
A trading account at a brokerage firm allows you to buy and sell a full range of securities available on the open market, but choose your broker carefully.
- Difficulty:
- Moderately Easy
Instructions
Things You'll Need
- Financial Calculator
- Brokerage Accounts
- Paper And Pencils
- Personal Financial Software
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Gathering Information
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1
Call several major brokerage firms in your area and ask for the broker-of-the-day, duty broker or new accounts broker. Be ready to take careful notes of each conversation.
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2
Ask each broker about the firm's minimum deposit for opening a trading-only or cash account and what account features are offered (for example, the ability to trade on margin).
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3
Inquire about account fees, broker compensation and whether the firm provides any online services. Ask for brochures.
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4
Thoroughly discuss what costs, such as commissions, are negotiable. This is important!
Choosing the Brokerage
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1
Review the information you have gathered and rank the top three brokerage firms.
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2
Call the brokers, top-ranked firm first, and make appointments to visit their offices during market hours.
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3
Tour each office and note the availability of research materials, a customer computer terminal and a cashier station for processing deposits and checks.
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4
Choose the firm that you feel offers the most resources and services that you will use for the best cost.
Opening the Account
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1
Take home the documents requiring your signature for opening an account and carefully read all the terms and conditions to which you will be agreeing.
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2
Open your account only after having all your questions answered and making sure you understand critical information regarding your account's cost, features and limitations.
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3
Get copies of all signed documents relating to your account.
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1
Tips & Warnings
Deposits in the money market funds of brokerage accounts get better returns than bank saving accounts, but they are not FDIC-insured.
Traditional brokers are compensated for assets under management and trading activity. If you maintain an account with a low balance and few trades, don't expect much attention from your broker.
Check your brokerage statements carefully and correct errors immediately to avoid possible tax-reporting problems later.
Don't depend entirely on brokerage record keeping. Have a system for filing all brokerage statements, confirmations and related documents.