Are you looking for the right broker to buy and sell stocks and stock options? How do I open a brokerage account? What are the requirements to opening a brokerage account? Can I open a brokerage account for my child who is a minor? There are many questions that leave you looking like I do in the picture.
But have no fear, in this article, I have answered most questions you may have about stock brokers. To look at particular sections, use the table of contents.
Do you want to know how to open a brokerage account around the world?
Whether you are a beginner or a professional, in order to make any stocks or options purchases, you will need to have an online brokerage account. This article will inform you on how to open a brokerage account around the world.
It’s an easy process to open an account but it takes a day or two to process and another number of days to process the initial amount of money you put in the account.
What does a stock broker really do?
A stock broker is like a one stop shop for buying and selling stocks and their options, bonds, index funds, and mutual funds. Some even allow you to buy cryptocurrencies on the same account.
That means if you want to buy and sell any of instruments mentioned above other than crypto perhaps, you will need a broker. In other words, the brokers job is to arrange trades between buyers and sellers.
However, a broker cannot do anything without your instructions. You can use your phone, computer or another type of device to log into your account, choose the action you want carried out, and the broker follows your instructions.
What types are brokerage firms are there?
Brokers come in three varieties:
1. Online brokers: a brand-new kind of online client interaction for investments in digital assets. Speed, availability, and inexpensive fees are the major benefits of online brokerages.
2. Discount brokers: The term “discount broker” refers to a stockbroker who executes buy and sell orders at a lower commission.
3. Full-service brokers: Customers may get a variety of expert services from a full-service brokerage, including tax advice, investment guidance, equities research, etc.
Nowadays with a growing number of asset classes (meaning: different investment options), brokers perform even more functions than perhaps listed here.
What does a stock broker do for you?
The simple definition is: a stock broker manages, executes the buying and selling of shares on your behalf. The shares can be of stocks, options or anything instruments such as mutual funds or bonds as previously mentioned.
But even more than their basic duty above, they also:
🔹 Provide market data and quotations and pretty much all-around trading information to help you make informed buying decisions
🔹 Provide you an interface for you to trade the instruments you want
🔹 Provide assistance concerning their trading platforms
🔹 Make available market conditions data and other market players
🔹 Lend customers money (if you have a margin rather than a cash account)
🔹 Provide customer data storage and security and more
Brokers are the backbone of the financial markets. They are constant because regardless of what the market does, they make money.
They earn commission to carry out your trading decisions after all. But ultimately, they want to see you succeed because your success is just as good for them as it is for you. That is why they provide you with two types of accounts.
What types of accounts are available at brokerage firms?
There are two types of accounts that petty much all stock brokers offer. You have the option of opening a margin account or a cash account.
Margin account VS Cash account
The difference between a cash and margin account is that with a margin account, the broker allows you to borrow money from them to trade.
For example, if you deposit $3,000 in your account, your broker will let you borrow another $2,000 for a total buying power of $5,000. This is just an example to illustrate how a margin account works. In essence, a margin account is like having a credit card alongside the cash you deposit in your account.
Each broker is different and lets you borrow based on a number of factors but the gist of it is the same. Here is a list of benefits or drawbacks associated with each account type.
* You pay interest on the money you borrow
- Can borrow broker money to trade with
- Advanced options strategies available
- Need $25K for unlimited trading
- Restricted to 3 trades per 5 days (PDT)
- Cash is available same day after trade
* You don’t pay interest
- Only use your own money
- PDT rule doesn’t apply
- Unlimited trading
- Basic options trading
* PDT means, pattern day trader it is a restriction that keeps people from making unlimited amount of trades if they have an account that is less than $25,000. This rule does not apply for a cash account; however, funds used to make a trade in a cash account settle (available to be used again) the following day.
* Risk alert – keep in mind that trading on margin can be risky because if your account drops in value, the broker can issue a margin call and you have to deposit a certain amount of money into your account.
Although there are risks involved with a margin account, the benefits may sometimes outweigh the risks. To better illustrate the benefit of a margin vs a cash account, the image below demonstrates the benefits well.
Hopefully the information provided here helps you make the right decision for you. With that you mind, you be thinking, how do I open an account?
How do I open a brokerage account?
Opening a brokerage account is very straight forward.
You sign up for any of the brokers recommended below and provide some personal information to setup your account. What you usually need is:
🔹 Your address and personal information such as your birth date, and social security number and financial information
🔹Approval takes roughly 3 to 5 days, sometimes faster depending on the broker
🔹 The next step is to fund your new account using an ACH or wire transfer
It’s that simple.
Another common question asked by parents also is,
Can I open a brokerage account for my child who is a minor?
Yes, you can open a custodial account for your child. What is a custodial account?
A custodial account is an account that a parent opens in a child’s name, the parent has control of the assets in the account, however, the child is the owner of the account.
When the child becomes an adult, the account is then transferred from the custodial (the parent or guardian of the account) to the child who is now an adult.
There are two types of custodial accounts. The main difference is what is allowed to be held in the account.
-a UTMA account may include any type of asset, including works of art, real estate, or even intellectual property such as royalties from a book.
-a UGMA account can include cash, stocks, mutual funds, or insurance policies. source
Now that we have covered that, let’s move on to how market data helps your account.
Do I need market data to buy and sell stocks?
Before I answer that, let’s first explain what is market data. Market data provides you with up to date information on stocks and options you want to trade.
Market data enables traders and investors to see historical price patterns and the most recent prices for a variety of assets, including currencies, derivatives, fixed-income products, and stocks.
The ticker symbol and exchange code, together with the most recent bid and ask prices and the time of the last deal, would all be included in the market data for a specific instrument’s identification as well as where it was traded.
Additionally, it could include static data on the financial instrument that was obtained from several sources, as well as the volume traded, bid and offer sizes, and other information.
The most typical method for traders and investors to get market data is via one of the many financial data providers that specialize in gathering, scrubbing, compiling, and circulating market data.
Due to their extensive product tracking and regular updates, market data streams share enormous amounts of data. And the broker provides you with this information for a nominal fee.
Is there another way to get market data and maybe even more information than my broker?
Of course, there are a plethora of companies that provide free and paid market data. Some of the best and well known companies are:
VectorVest’s stock research and business management system analyzes more than 18,000 stocks every day and, rates each one as a buy, sell, or hold. Not simply providing statistics, VectorVest also provides solutions.
For instance, what to purchase, what to sell, and most crucially, when to buy or sell stocks. It will only provide you with accurate and neutral responses, as well as investment advice that you can easily get online or via independent research.
For traders and investors who are interested in learning a lot about financial market data, Finviz is a whole suite of tools.
Stock screeners, news feeds, portfolio management, stock charting, and other helpful services are among the many available on this stock market data-providing platform.
Refinitiv contains more than 200 collections of financial data from thousands of sources throughout the globe. Additionally, it offers a financial analysis of significant global trends and events on its website via webinars on commercial activity in key regions of the globe and interviews with financial experts.
It’s often a wise choice to use trustworthy market authority like the ones mentioned above when determining where to get financial information. We should have done more study on the stock market data specialists since they may help us view things in new ways that we would not have otherwise and help us avoid making investments that are not as profitable.
There are many other market data companies out there with excellent reputation but I have personally used both VectorVest and Finviz and highly recommend them. I have also heard great things about Refinitiv although I have not used their service.
Before going any further about other benefits of a brokerage account, how to execute trades and so forth, let’s first look at some of the well known brokerage firms around the globe.
Brokerage firms around the world
* This list is by no means and exhaustive list but it should provide you with a starting point in choosing and opening your brokerage account.
10 Brokerage firms based in Canada and USA
There are multiple brokerage firms in Canada and the united states, working nationally and internationally. The topmost and internationally recognized brokerages firms are listed below:
● Interactive Brokers (International) the broker I use and the best of them all I think.
● TD Direct Investing (International)
● Webull (National)
● CIBC Investor’s Edge (International)
● Questrade (International)
● Qtrade Securities Inc.(National)
● Wealthsimple Inc.(International)
● Zacks Trade (International)
● Fidelity Investments (International)
● E-Trade Financial Corporation (International)
● TD Ameritrade (International)
● The Charles Schwab Corporation (International)
10 Brokerage firms working in Europe
The investing platforms in Europe for exchange-traded funds (ETFs), cryptocurrencies, equities, and several other types of business investments are operational across the country or the globe. The following is a list of the most reputable brokerage companies in Europe:
● XM Broker
● Investors Europe Mauritius
● Swissquote Group
10 Brokerage firms available in Africa
To facilitate trading in the stock market and other financial investments, Africa is home to several local and international brokerage houses. Below is a list of the most prominent and well-known brokerages in the world:
● VT Markets
● Nord fx
● Interactive Brokers
10 Brokerage firms available in Asia
The region of Asia is home to a variety of local and international brokerage firms, which together serve to make trading on the stock market and other types of financial investments easier. These are some of the most prestigious and well-recognized brokerages in the whole globe. The following firms are among the most successful Asia Pacific Brokers now operating throughout Asia:
● Interactive Brokers
● Nord fx
What should you do next?
Now that you are aware of what is needed to open a brokerage account, the requirements, the difference between margin and cash account as well as the companies to use for market data, your next reading is on the types of stock market orders.
When you have fully grasped the types of market orders, then check out my post on 20 must read investing books. The more you know the better your chances of making money. Knowledge is not always power, knowledge is money and money grants you power.