Updated on September 12th, 2019
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Over the years, trillions of dollars have been made by buying and selling stocks, but where exactly are investors doing this trading?
Before the 90’s, most investors called their stock broker and gave him or her orders to buy or sell a stock at a specific price and quantity. The broker would then relay this information to floor traders who would literally yell at each other until a match was made. Since these times of absolute chaos on wall street, technological advances have allowed online stock trading to become a standard.
These days, investors still commonly buy and sell stocks through stock brokers but specifically through desktop, web, and mobile applications provided by the broker. To gain access to trading online with these applications, an investor must create an online account with companies like TD Ameritrade, Charles Schwab, Fidelity, Robinhood, or E*Trade just to name a few. To sign up, you must be 18, 19, or 21 years old depending on what state you live in.
If you are a parent or legal guardian wanting to give your minor a head-start at investing and growing wealth, you can open a custodial account to do just that. With this type of account, the assets will belong to the minor but the parent or guardian will control the account until the minor is of age.
Before signing up with a specific stock broker, you should compare the pros and cons of each. When comparing brokers, you should focus on 4 major aspects: the services a broker provides, account minimums, incentives and special offers, and what commission they charge.
Services provided by a broker can include whether a broker has extended hours trading, free trading tools, access to buy stocks globally, and free research, news, and data about stocks.
Account minimums tell you how much money you need to deposit when signing up for an account and typically vary between brokers, with some allowing you to create an account without depositing anything.
Incentives and special offers to sign up with a specific broker can include cash and a designated time period of commission-free trades if you deposit a certain amount of cash into your account when signing up.
Commission is how much the broker will charge you to execute your buy or sell order.
Ultimately when choosing an online broker, you should choose the broker that fits your investing needs and costs you the least amount of money to trade. When buying and selling stocks, the cost to trade can quickly eat away at your profits.
After choosing your broker, signing up online, and transferring funds to your account, you will have the ability to trade stocks. Through these applications and also over the phone, which will cost you a little more , you can place orders to buy and sell stocks and the broker will execute your order in exchange for a commission. Thanks to technology, this process happens very fast!
Even if you're not ready to invest with real money, many brokers allow you to practice trading stocks with accounts using fake money. Brokers call these paper accounts. This allows you to learn and become familiar with the stock market without the stress of potentially losing hard earned money.
Stocks: The Basics