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A brokerage account can help you get started managing your savings and investing in assets. You can use such an account to transact and hold assets like stocks, bonds, exchange traded funds (ETFs), commodities and cash.
A brokerage account can also be used to invest for your retirement and even for speculation using short term trading strategies. Having a funded brokerage account allows both traders and investors to take advantage of the many opportunities that exist to make money in the capital markets.
But keep in mind not all brokerages are created equal, and it’s important to choose a broker that meets all of your needs and requirements. If you have absolutely no experience in trading or investing, you need a broker with solid online educational resources, such as videos, webinars and articles written by experts.
Ready to get started? Read on to find out what steps you’ll need to take to open an online brokerage account.
1. Consider Your Cost Boundaries
Cost boundaries consist of limits you can set in order to create a healthy sense of the personal expense an activity will involve. A prudent consideration of your cost boundaries when looking for a broker will often take into account what you plan on using your brokerage account for and how much you wish to deposit in it.
If you plan on using your brokerage account for investing, then you would ideally have a set sum of money that you do not need in the near future and plan on using for investment purposes. You probably also intend to grow that money gradually into a larger nest egg over time. Your intentions will rarely include losing much money, if any at all, so you will tend to pick safer investments and seek to conserve your investment capital.
On the other hand, if you plan on using your brokerage account for speculative trading, then you should only ever use money that you can afford to lose completely, which is sometimes called “risk capital”. If you trade with the money needed for bills or your child’s education, your emotions may affect your objectivity as a trader and betray you when you really need to keep a level head. You also may not be able to meet your basic financial obligations if you take a severe loss that clears out your trading account.
2. Choose a Broker
With so many excellent stock and online brokerages available, it can be challenging finding the broker that best meets your needs. Your level of experience and the type of assets you plan on trading has a lot to do with which broker would be best for you, so take some time to evaluate your experience and knowledge of the markets before selecting a broker.
Remember that brokers who support trading and investing in stocks and equities do not always allow you to trade currency pairs, cryptocurrencies or commodities, for example.
For example, if you’ve already been trading for years, have the capital and want to invest internationally, look at a sophisticated broker like Interactive Brokers that offers low transaction fees and access to many markets and exchanges around the world. This broker has oversight from all major financial regulators and gives you access to most major world financial markets including, commodities, stocks, futures, options, contracts for difference (CFDs), exchange traded funds (ETFs) and indices.
If you have little trading experience, limited time to select trades or want to participate in social trading, you could open an account with an online broker like eToro. This broker takes U.S. clients and has excellent educational resources.
It also gives you the option of following a successful trader using its social trading platform, and you can be putting your money into the markets right away while you develop and test your own trading strategy in a demo account.
Seasoned investors who wish to use their brokerage account to invest for retirement purposes should consider opening an account with a large broker that offers this type of account and provides access to the investment products they require. For example, well established stockbrokers like E*TRADE or Charles Schwab that also offer online trading platforms for convenience might be suitable.
And if you plan on using a short-term trading strategy, such as day trading stocks, you’ll probably feel more comfortable with a low commission or commission-free broker like Robinhood. This will help keep transaction costs from adding up when you’re trading actively.
Regardless of the type of asset you plan on trading, many brokers offer new clients a practice or demo account that could give you a good idea of the quality of the broker’s services and research resources. A demo account lets you practice trading without committing any of your hard earned funds to determine how profitable your trading strategy is. Many platforms can also provide excellent technical and fundamental analysis research tools you can learn how to use in a demo account.
You can also check out several brokers’ services by using their free demo accounts. This should give you a good idea of which broker would best fulfill your requirements. Use the table below to compare different reputable brokers and make a decision that best suits your needs as a trader or investor.
Webull, founded in 2017, is a mobile app-based brokerage that features commission-free stock and exchange-traded fund (ETF) trading. It’s regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).
Webull offers active traders technical indicators, economic calendars, ratings from research agencies, margin trading and short-selling. Webull’s trading platform is designed for intermediate and experienced traders, although beginning traders can also benefit.
Webull is widely considered one of the best Robinhood alternatives.
- Active traders
- Intermediate traders
- Advanced traders
- No account maintenance fees or software platform fees
- No charges to open and maintain an account
- Intuitive trading platform with technical and fundamental analysis tools
- Does not support trading in mutual funds, bonds or OTC stocks
E*TRADE is an online discount trading house that offers brokerage and banking services to individuals and businesses. One of the first brokers to embrace online trading, E*TRADE not only survived both the dot-com bubble and Recession — it thrived. You can choose from two different platforms (one basic, one advanced). E*TRADE is a suitable broker for traders of most skill levels, whether you want to buy mutual funds and hold them for decades or dabble in options swing trading. E*TRADE offers a library of research and education materials to help you out.
- Active traders
- Derivatives traders
- Retirement savers
- Sophisticated trading platforms
- Wide range of tradable assets
- Exceptional customer service
- Limited currency trading
- Higher margin rates than competitors
- No paper trading on its standard platform
Moomoo is a commission-free mobile trading app available on Apple, Google and Windows devices. A subsidiary of Futu Holdings Ltd., it’s backed by venture capital affiliates of Matrix, Sequoia, and Tencent (NASDAQ: FUTU). Securities offered by Futu Inc., regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).
Moomoo is another great alternative for Robinhood. This is an outstanding trading platform if you want to dive deep into smart trading. It offers impressive trading tools and opportunities for both new and advanced traders, including advanced charting, pre and post-market trading, international trading, research and analysis tools, and most popular of all, free Level 2 quotes.
Get started right away by downloading Moomoo to your phone, tablet or another mobile device.
- Cost-conscious traders
- Active and Advanced traders
- Over 8,000 different stocks that can be sold short
- Access trading and quotes in pre-market (4 a.m. to 9:30 a.m. ET) and post-market hours (4 p.m. to 8 p.m. ET)
- No minimum deposit to open an account.
- No chat support
This latest groundbreaking technology is IBKR GlobalAnalyst, a new trading tool that helps investors compare the rate of PEG or price-earnings growth valuations and provide more immediate and comprehensive financial metrics of stocks, globally.
Recognizing that stock selection can be challenging for investors to compare the valuations of domestic and international stocks, Interactive Brokers created GlobalAnalyst to offer investors a simple, yet powerful tool to easily evaluate investment opportunities around the world.
Using GlobalAnalyst, investors can search for stocks by region, country, industry, market capitalization and currency to uncover undervalued stocks worldwide. The resulting table displays the current market and financial metrics, including the PEG Ratio. The PEG Ratio is the PE ratio divided by the three-year compound earnings growth rate, and smaller PEG Ratios typically indicate undervalued companies.
- Price earnings growth valuations
- Easily evaluate investment opportunities
CenterPoint Securities is ideal for active traders who demand access to advanced tools and services. While investors and casual traders are likely to be content with the basic offerings of traditional online brokerages, active traders will benefit from CenterPoint’s suite of advanced trading tools. If you value execution quality, access to short inventory, advanced trading platforms, and accessible customer service, CenterPoint is an excellent choice.
- Intermediate to Advanced traders
- High-volume traders
- Momentum traders
- Short sellers
- Unrivaled access to short inventory
- Flexible order routing for improved executions
- Discounts for active traders
- Advanced platform with fast executions
- Reliable customer service
- Not designed for beginner or low-volume traders
TradeStation is for advanced traders who need a comprehensive platform. The brokerage offers an impressive range of investable assets as frequent and professional traders appreciate its wide range of analysis tools. TradeStation’s app is also equally effective, offering full platform capabilities.
- Advanced traders
- Options and futures traders
- Active stock traders
- Comprehensive trading platform and professional-grade tools
- Wide range of tradable securities
- Fully-operational mobile app
- Confusing pricing structure to leave new traders with a weak understanding of what they pay
- Cluttered layout to make navigating TradeStation’s platform more difficult than it should be
3. Set Up the Account
Once you have assessed your needs, chosen a suitable broker after setting up several demo accounts and have money to trade with or invest, you are now ready to set up a live trading account.
You should already have an account with your preferred broker since you opened a demo account with them. To convert it to a live funded account, you will generally need to submit official documentation proving your identity and your address. If you’re opening an account from the United States, be prepared to provide your Social Security number, date of birth and bank account details as well.
If you have a 401(k) plan, then you will be limited to investing in mutual funds and annuity contracts, in addition to one or more guaranteed accounts. An interesting alternative is a 401(k) window account that is a self-directed brokerage account (SDBA) that also allows you to invest for your retirement in stocks, bonds and ETFs. The main advantage of 401(k) window accounts is that you’ll have many more investment options for your retirement than with a straight 401(k) plan.
While you can take considerably more risk with your retirement funds in a 401(k) window account, keep in mind that some types of higher risk trades cannot be made in this type of account. Transactions involving margin trading, options purchases and futures trading are strictly prohibited in such accounts.
4. Fund Your Account
While many brokerages allow you to open an account without a deposit, once you decide to fund an account, you’ll need to formalize your relationship with the broker. Minimum deposits for brokers range from just $1 to thousands depending on the broker you choose. You’ll want to choose a broker that offers an account type with a minimum deposit you can afford.
Before you fund your account, remember to make sure that you are not using money you will need in the short term, even if you only plan on investing. Trading with the mortgage or rent money can also have serious consequences if the funds are lost, so only use risk capital to fund your account if you plan on speculating with it.
If you’ve never traded before and have no experience whatsoever in trading and investing, you could fund a social trading account instead of a normal trading account. Social trading allows people with no trading experience to mirror and copy trades made by successful traders and investors.
In addition to participating in the copy trader’s profits, you can learn a great deal about the market and trading by monitoring how the trader you are copying selects and manages their trades. Even if you intend to start making your own transactions eventually, social trading could be a good option while you get educated on financial markets and develop a plan to guide your investment or trading activities.
Depending on your trading or investment style, you’ll generally want to select positions that offer a good chance of capital appreciation. If you plan on trading short term strategies, then you’ll probably want to monitor active stocks with high volume and volatility.
Investors who are looking for income may want to stick to stocks that pay high dividends. In contrast, day traders who want to take advantage of short term moves would focus on highly volatile stocks.
To get you started, we have included a recent list of the stocks showing the biggest gains and losses in the table below.
Best Type of Broker to Open an Account With
The best type of broker to choose to open an account with depends in large part on what type of trader or investor you are, what strategies you plan on using, and what assets you wish to operate in. You should also generally look for a well-regulated broker to trade through to protect your margin deposit or invested funds.
Once you have found a suitable broker, you can just approach them to open an account, which can usually be done online. You can even start with a demo account 1st to check out services before funding a live account.
Review our recommended brokers and find the right platform to open your online brokerage account today.