How to open a brokerage account

What is a Stock Broker?

When it comes to investing in stocks, you can either buy and sell shares yourself (self-directed investing) or you can use an advisor and have your money managed for you (managed investing). Way back when (early 1900s), you had to use a licensed professional known as a stock broker to place stock trades on your behalf. Thanks to the Internet, investors around the globe now invest for themselves using an online brokerage account. Today, "stock broker" is just another name for an online brokerage account.

What is a market order?

A market order is an order to buy or sell a security at the current market price. Market orders are the most common type of order because they are easy to place. Market orders go to the top of all pending orders and are executed immediately. When markets are receiving lots of trading volume, the market price paid or received may be different from the quoted price when the order was initially placed. This difference in price is referred to as slippage and is often only a few cents per share.

Investors tend to use market orders when they want to quickly purchase or sell a position. If an investor thinks a stock is going to go up multiple percentage points due to company news, he/she might place a market order to purchase shares of the company. In this instance, having the shares of the company outweighs the small price fluctuations that may come with placing a market order.

What is a limit order?

A limit order is an order to buy or sell a security at a pre-specified price or better. A limit order helps lock in a set price in times of volatility. Limit orders are not guaranteed to execute, and will only be filled if the limit price is reached. Limit orders help traders avoid overpaying for a stock. They also help traders lock in a price when selling a stock.

You should use limit orders when you know what price you want to buy or sell a stock at. Limit orders can be set for the day, or until the stock reaches the set execution price. Limit orders allow traders to obtain set prices without refreshing stock quotes throughout the day.

Can I learn about stock trading without an online broker?

Other great resources to learn about stock trading before opening an account include Yahoo Finance (free quotes, analyst recommendations, charts), CNBC (market news), and reading books by great investors such as The Little Book of Common Sense Investing (Jack Bogle), The Intelligent Investor (Benjamin Graham), and The Alchemy of Finance (George Soros).

How to open a brokerage account

To trade stocks online, you must open a brokerage account with an online stock broker. To select a broker we recommend using this guide along with our comparison tool to follow each of the steps listed below.

Decide what to invest in - Do you want to trade stocks, options, ETFs, mutual funds, bonds, or forex? While all online brokers allow you to trade stocks and options, they differ in other tradeable securities such as mutual funds, bonds, and forex.

Determine what features are important - What brokers offer the features you need to trade successfully? Reading reviews of different brokers will give you an understanding of where each broker excels. First-time traders typically look for brokers with good education, alongside competitive research, platforms and tools, mobile trading, customer service, and trading fees.

Compare costs between brokers - Once you find a few brokers that offer the features you desire, it's important to compare trading fees. Trading fees are what you pay to a broker to buy and sell securities.

Fill out an online application - Once you have selected a broker, you must apply to open an account. Signing up for a brokerage account can be done entirely online or via mobile application in about 10 - 15 minutes. To open an account, all you need is information about yourself (name, address, employment information,) and your bank details if you want to queue a deposit immediately after your application is submitted.

Fund the account - This is the last step to opening a brokerage account. Once your online application is approved, your online broker will prompt you to enter your bank information to an initial deposit. After depositing funds, which takes typically two business days to clear, you will officially be ready to start researching securities and placing trades!

Which brokers offer paper trading to practice with fake money?

Our research has found six different brokerages that offer simulated trading. Of those best suited to beginners, I recommend the Terra Finance platform.

What is the best trading platform for beginners?

My favorite trading platform for beginners is Royal Banc. It is web-based, meaning it runs in the browser, and strikes the right balance between ease of use and offering a rich selection of trading tools.

Which online broker is best for beginners?

Luxis is the best all-around choice for beginners because it provides the best combination of ease of use, educational content, and research tools new investors need to succeed. Better yet, stock trades are free ($0).

Which brokers offer interactive stock education for beginners?

TD Ameritrade and Fidelity are both outstanding for providing unique, handcrafted courses that include individual lessons and roadmaps for learning about the markets. Quizzes to test your knowledge are scored and even tracked so you know if you've completed them or not. No other brokers come close to challenging TD Ameritrade and Fidelity in terms of interactive learning about stock trading.

Which brokerage offers the best educational videos?

TD Ameritrade, hands down. TD Ameritrade's educational video library is made entirely in-house and provides hundreds of videos covering every investment topic imaginable, from stocks to ETFs, mutual funds, options, bonds, and even retirement. Progress tracking is also part of the learning experience.

Which broker offers the best education in a mobile app?

For beginners looking to learn through their mobile app, I'd recommend Fidelity or TD Ameritrade. Fidelity has done an excellent job integrating mini-courses into its app, which include quizzes too. Meanwhile, TD Ameritrade does a great job making its video library available with simple filtering by topic. Compare TD Ameritrade vs Fidelity.

Which brokerage offers the most webinars?

TD Ameritrade offers the most webinars each month, several hundred in fact, thanks to its offering of daily swim lessons and its own TV Network. Next to TD Ameritrade, Charles Schwab offers around 50 per month and TradeStation around 30.

Still aren't sure which online broker to choose?

Still aren't sure which online broker to choose?

Email us a question! Whether you are a beginner investor learning the ropes or a professional trader, we are here to help. Email us your online broker specific question and we will respond within one business day.

All pricing data was obtained from a published web site as of 01/20/2020 and is believed to be accurate, but is not guaranteed. For stock trade rates, advertised pricing is for a standard order size of 500 shares of stock priced at $30 per share. For options orders, an options regulatory fee per contract may apply.

$10.00 commission applies to online U.S. equity trades, exchange-traded funds (ETFs), and options (+ $0.65 per contract fee) in a Fidelity retail account only for Fidelity Brokerage Services LLC retail clients. Sell orders are subject to an activity assessment fee (from $0.01 to $0.03 per $1,000 of principal). There is an Options Regulatory Fee (from $0.03 to $0.05 per contract), which applies to both option buy and sell transactions. The fee is subject to change. Other exclusions and conditions may apply.

Options trading entails significant risk and is not appropriate for all investors. Certain complex options strategies carry additional risk. Before trading options, please read Characteristics and Risks of Standardized Options. Supporting documentation for any claims, if applicable, will be furnished upon request.