Making the decision to take action is the best thing you can do for your future. I remember when I made my decision to open an account with my broker and I did not know what to expect. As a new investor at the time, I would call my broker with lots of questions and they patiently answered each one with such reassurance. In addition, they even offered to help conduct trades for me. Overall, I can say that all the resources I have shared with you on this site have given me the greatest opportunity to change my life for the better.
Before you get started, let’s go over different price order types that you want to become familiar with on your broker’s platform when you conduct online trades(buying and selling shares). See example below.
This is an example of what you see when you select “trade” on your online broker’s platform.
Market Order(most common): This is an order to buy or sell a security right away at the most recent price in the market. This is the quickest way to get in or get out of a trade.
Limit Order: This is an order to buy or sell at a price that you choose. For a buy order, it will execute either at your price or lower. For a sell order, it will execute at your price or higher. A limit order may take longer to be executed because the market would have to meet your desired price first.
Stop Limit Order: For a buy order, you specify a price higher than the market price. For a sell order, you are specifying a price lower than the market.
Stop Loss Order: This is an order you place to minimize your loss on a trade. For a buy order, you would choose to execute at a price lower than your entry price. People love using this order to eliminate the “hope mentality” that a losing stock might go back up when that may never happen. You can reduce your risk significantly using this order type.
Note: Remember to cancel the stop order if you change your mind after executing the trade.
A broker is a firm that charges you a commission fee every time you buy or sell a stock on their platform. Choose a broker that fits your needs. The best brokers out there are TD Ameritrade, Scottrade, and OptionsHouse (by E*Trade). Brokers that provide great customer service can put a beginner’s mind at ease. Someone that can answer your questions, no matter how small it may be, can make a big difference in your trading experience. Some brokers have no account minimum requirement so you can invest a spare $40.00 to begin. It does not take a lot of money to get started!
An IRA is an Individual Retirement Account. Roth IRA and Traditional IRA are the popular type of retirement accounts you can open with a broker. The Traditional IRA account(like a 401K plan) is not taxable meaning you do not have to pay taxes on that account. You have the option to rollover the money from your 401K plan into a Traditional IRA, which is still non-taxable.
If a retirement account is not the choice for you, you can open a regular brokerage account to use for income purposes. For tax information, visit the IRS website to see how each account type affects you directly.
Commission fees is a factor to consider but there are tradeoffs with some brokers. For example, a few brokers have a special offer to “Trade Free For 60 Days” when you initially open an account with a lump sum deposit. That means you do not pay the commission fee each time you buy or sell for the first 60 days. As you learn to trade, you keep that extra cash in your pocket.
The process is as easy as choosing a broker, account type, and signing up online to get started. Once you fill out the required information on their website and receive an email confirmation with them, you are ready to go! Simple as that!
TD Ameritrade is a well-known broker that gives you access to a variety of investment choices. Their educational resources range from videos & courses to a customized learning curriculum. They help investors pursue financial goals with access to guidance, professional money management, and great trading platforms.
By Krystle Hall