| This article will light your path by providing some | | | | These firms have zero to no-fees and lower |
| insights on some of the important issues to consider | | | | commissions compared to full-service brokers. |
| before starting to trade online. | | | | Internet brokerages are an example of discount |
| First and foremost you will need to open an account | | | | brokers and will allow you to open an account and |
| with one of the brokerage firms. | | | | trade online over the internet. |
| What are the factors you need to consider before | | | | You should also consider about the feature that are |
| you open up an account? Some of the criteria you | | | | available and how they best fit your trading style. If |
| might have to consider are: | | | | you expect to trade less frequently, you will probably |
| - Account & Margin Requirements. | | | | not be interested in real-time quotes. On the other |
| - Features & Services. | | | | hand if you expect to trade more frequently and |
| - Types of Products Offered. | | | | need access to real-time quotes you will want a |
| - Commissions & Fees. | | | | broker to provide that service either free of charge |
| - Expertise & Reputation. | | | | or minimal cost. |
| Account & Margin Requirements: | | | | You might also want to consider services such as |
| This feature varies from one broker to another. | | | | free checking, free money direct (ACH), bank wires, |
| Some might require you to put down $500 while | | | | monthly statements, written or electronic |
| others might have a minimum deposit of $2000. | | | | confirmations etc. |
| Margin requirements will also vary on the type of | | | | Types of Products Offered: |
| trading strategy you employ. Margin trading involves | | | | Many traders would like to diversify their portfolios |
| substantial risk and it is important that you become | | | | across different products such as bonds, stocks, |
| acquainted with your strategy before trading on | | | | cash, mutual funds, money market accounts, |
| margin. Most of the brokerage firms make you sign | | | | Individual Retirement Accounts (IRA's), Certificate of |
| an agreement form stating that you understand the | | | | Deposits (CD's) etc. You might want to carefully |
| risks associated with margin trading. This contract | | | | consider the types of products offered by the |
| agreement is to protect the brokerage firms to | | | | brokerage firms. |
| ensure that traders understand the implications of | | | | Commissions & Fees: |
| trading on margin. For example, a beginner might | | | | One pays commissions when entering and exiting a |
| short a stock in an uptrending market and could risk | | | | trade. The commissions you pay vary depending on |
| his account. | | | | the brokerage firm. Some brokers might even |
| Margins are usually calculated after the market closes. | | | | negotiate the commissions based on the account |
| If you have an open position that has moved | | | | activity and size. |
| significantly against you, the brokerage firm may | | | | When choosing a broker you should be aware of the |
| issue a "margin call" requiring you to deposit additional | | | | fees they charge. Ask them if they have account |
| funds to maintain your position. If you are unable or | | | | maintenance fees, inactivity fees or any penalty |
| unwilling to do so a part of your account will be | | | | charges for not maintaining minimum balances or for |
| liquidated to meet the call requirements. | | | | withdrawing funds. |
| Margin or No Margin, you should be able to open an | | | | Reputation: |
| account with the brokerage firms and still be able to | | | | The broker you opt for should fully understand your |
| trade stocks on the long and short side. Brokerage | | | | trading needs and have support staff that can handle |
| houses generally require you to put down big capital | | | | difficult and complex transactions. Try to ascertain if |
| before they allow you to short stocks. | | | | the broker you selected has an established reputation |
| Margins are usually calculated after the market closes. | | | | for executing trades promptly and going an extra |
| If you have an open position that has moved | | | | mile for its customers. These characteristics will |
| significantly against you, the brokerage firm may | | | | enhance your trading experience and can lay the |
| issue a "margin call" requiring you to deposit additional | | | | groundwork for negotiating reduced commission cost. |
| funds to maintain your position. If you are unable or | | | | List of Brokers: |
| unwilling to do so a part of your account will be | | | | The list below provides you with some of the well |
| liquidated to meet the call requirements. | | | | know brokerage firms and their websites. This list is |
| Features & Services: | | | | by no means a recommendation in any order. |
| The decision to choose a broker based on the | | | | - Charles Schwab |
| service the provide will depend on your trading | | | | - E*Trade |
| approach. If you require a personal service and | | | | - TD Ameritrade |
| attention you will probably want to go with | | | | - Scottrade |
| "full-service brokerage". You will be assigned and | | | | - Fidelity |
| individual broker who will personally handle your | | | | Summary: |
| account. Minimum account requirements and | | | | Selecting the right broker to meet your personal |
| commissions are higher for full-service brokerages | | | | needs is a very important step in trading. Your |
| that for discount brokerages. | | | | process for selecting a brokerage firm should involve |
| But in contrast, if you prefer to be in-charge of your | | | | collecting information on several firms, determining |
| own trades or do not have the capital needed to | | | | your needs and what brokerage firm best meets |
| meet the requirements of a full-service brokerage | | | | those needs. |
| you will probably want to choose a "discount broker". | | | | |