There are four types of trading accounts that can be used to invest in the financial markets. You will want to choose an account that suits your needs and your goals.
A cash account is a basic trading account that allows you to deposit money to trade stocks, commodities, currencies and indices
An IRA account is a retirement account that can be used to invest in the financial markets with the purpose of generating income that will be used in retirement.
A margin account enables you to borrow funds from your broker against the securities and cash in your account. Margin enables you to control larger positions but it also amplifies your losses if the trade does not go your way, so you must be cautious when using margin.
An option account allows you to trade options and only experienced investors should choose this type of account as options carry more risk than bonds or stocks.
When opening an online brokerage account, you can simply contact the broker and they will either provide you with the forms you need to complete or they will complete the paperwork on your behalf.
Once you have opened an account, you will need to learn how to perform transactions and place orders. The following is a list of common order types that can usually be placed using your broker’s trading platform. Below is an image of a simple online trading order form.
This is an order that is immediately executed at the best possible price. These are usually the least expensive orders and there is little maintenance or work required by the broker.
A limit order is an order that is executed at a specific price. This will guarantee the price at which a security is sold or purchased and these orders generally cost more than market orders.
A stop order is a market order that is executed when a preset level is reached – this may also be a stop-limit or stop-loss order. The exact price is not guaranteed but this type of order is effective in protecting against additional losses.
AON (All or None)
This order is a condition on a limit order to either sell or purchase a security only if the broker is able to fill the whole order.
The expiry time for a day order is the end of the business day if it is not filled.
A GTC order, also known as Good Till Canceled, is an order to either sell or purchase a security and it is valid until it is carried out by the online broker or canceled by the investor.
Fill or Kill
This is an order set for immediate execution and if it is not immediately filled it is canceled automatically.
A short sale is an advanced trading strategy where a stock is borrowed and then sold with the expectation of returning the borrowed stock at a lower price.
Buy to Cover
A Buy to Cover order is an order that is executed with the purpose of closing a
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