If you’ve decided to invest in stocks, dealing with an online stockbroker may be a good choice for you. Trading stocks online is a very popular activity among investors everywhere, therefore there are plenty of online stockbrokers that you can choose from. Online stock trading platforms have become more functional and easy to use, plus brokers now provide tutorials and demo accounts for you to get familiar with the system.
Who Should I Choose?
But the main question remains, which online stockbroker should you use? While they all work on the same principle, there are some differences between stockbrokers. You will first need to choose whether you want a cash account or a margin account. With a cash account, you deposit money into your account and use these funds to buy investments. With a margin account, the value of the cash and securities held in your account will act as a form of collateral for a line of credit extended to you by the broker, which allows you to buy more investments than you could with just the cash in your account. But this also means that you would be charged interest when you use the brokers money to buy stocks.
How Much Do I Need?
The minimum amount of funds required to open an account at an online stockbroker will vary. For a cash account, some online brokers have no fixed minimum amounts, while others require a minimum deposit that will range from $500 to $5000. Margin accounts have much higher minimums, so you would need to have anywhere from $2000 to $10 000 available in your account if you want to trade on margin.
What Are The Costs?
Fees charged by online stockbrokers will vary but are usually much lower than what a regular broker will charge you. Every time you make a trade, you will need to pay a commission to the broker. This usually ranges from $7 to $15. With online stockbrokers, you pay the same commission for each trade, regardless of how many shares you trade or their value. In an effort to attract new clients, many online brokerage firms now have special promotions that offer you free trading for a certain period of time, or a certain amounts of trades that you can make without having to pay commission. You will also find that some of them offer a bonus when you open an account with them. This bonus amount ranges from $50 to $600 but is usually based on how much money you’ve deposited in the account when you opened it.
In addition to trading stocks online, you may also be able to place trades through an automated telephone system or by speaking to a live stockbroker. But in these cases, you should be aware that the commissions that you will pay will typically be much higher than if you made the trades using the web based platform. For added convenience, some online brokers have a mobile version of their website, or an app that can be downloaded and used on smart phones, like the iPhone or Android based phones.
This articles was written by Pete Southern who is in-house editor at StockPriceToday.com an investment hub providing real time stock prices, charts and news.