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How do I Choose the Best Online Trading Account?

Article Details
  • Written By: Jessica Ellis
  • Edited By: Bronwyn Harris
  • Last Modified Date: 10 February 2020
  • Copyright Protected:
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    Conjecture Corporation
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Online stock trading has opened the financial market to more people than ever before. Whether trying to save for retirement, make additional money, or even create a whole new career, online stock trading makes investing easier and more accessible to the general public than traditional trading methods. Choosing the best online trading account will depend a lot of personal factors, such as investment limits and market knowledge. Other factors to consider include the rating of the online trading account, available services, markets allowed, and fees.

Most online trading account brokerages will require a minimum balance before allowing an investor to open an account. This helps them ensure a relatively safe profit, since people with higher balances are typically more serious traders that will generate fee charges. When choosing an online trading account, be sure to check if the account is cash- or margin-based. Cash accounts allow the investor to use only his or her own money to make trades; margin accounts allow the investor to borrow up to twice as much as they invest to create a larger trading balance. Margin accounts are generally considered riskier, as the investor is liable for the amount lost on a bad trade.

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How well an investor knows the market will be an important factor in determining which online trading account program to use. Some are geared toward beginners, and may offer tutorials, detailed explanations, and simulation programs to try out trading before risking money. Others are for those with more advanced knowledge, and provide far more complex charting, market information, and trade possibilities.

There are several online websites that provide reviews and ratings of sites that offer online trading account systems. Checking these websites carefully can help narrow down choices, as well as help the smart investor steer clear of fraudulent websites. If a site has a poor rating or isn't listed on a review website as a legitimate entity, seriously consider the risk before handing over personal information to an unproven company.

How an investor trades may play a large part in what online trading account is best for him or her. Since most trading sites charge fees for a variety of trading practices, it is important to find a site that fits an investor's trading personality. People who make trades on a daily basis, or make several trades a day, for instance, will want to find a site that offers a low fee for each trade. Picking the right trading account based on fees can save an investor money and prevent fees from devouring profit.

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