The Online Trading Broker and You

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By: Anne Durrell

Brokers may be viewed with some suspicion by those who aren't familiar with investments like stocks, currencies, and options. While the amazing changes wrought by widespread Internet access have opened the floodgates of information to which the public has access, you still need a broker to trade stocks or bonds. The word "broker" might refer to an individual at a brokerage firm, or it might be used as shorthand for "brokerage firm."

Just like in any profession, there are brokers who take advantage of investors' gullibility or inexperience. And there is the inherent uncertainty in investment advice. But that doesn't mean you should dispense with guidance from a broker altogether. There are plenty of good online trading broker who genuinely work hard to help their clients reach their financial goals.

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And nowadays, even discount online trading brokers offer impressive services for very reasonable fees. In the United States, to qualify as a broker, an individual must pass licensing exams from the National Association of Securities Dealers. The exams certify that brokers know about the product they are trading and that they are familiar with the laws of their industry. Other countries have similar licensing requirements.

If you are interested in trading stocks online with the help of an online trading broker, there are several types of accounts you can set up.

A cash account is simple: you deposit cash in it with which to buy mutual funds, stocks, bonds, or other investment instruments.

A margin account allows you to borrow from your online trading broker against the cash in your account and the securities you own. It is very important to learn about how margin accounts work before opening one. While you increase your potential profits greatly, you also increase your risks when you have a margin account.

An option account allows you to trade in options, which are financial instruments that depend on changes in the values of stocks or other assets. This type of investment is called a "derivative," and it is much more complicated and risky than simply trading stocks.

When you have an online trading brokerage account, and you're ready to start trading, do you know what to do? Well, you have to be specific about the transaction you want to execute. For example, a market order is an order buying stock at the best available price.
Fees or commissions on these trades are usually low, because the transactions are very simple and straightforward. A limit order is an order in which you buy a certain dollar amount of shares, for example, however many shares of Company X you can get for $1,000.

A day order goes away at the end of the trading day if it has not been filled, but a good till canceled order stands until it is transacted, or until the investor cancels the order. A so-called "fill or kill" order means that if it cannot be executed immediately, it is to be canceled.

Check out my other guide on forex trading hours

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