How to Open a Trading Account

Overview

1. Brief Introduction

2. Before Online Trading

3. Choosing Brokerage Companies

4. Trading Account Opening Procedure

5. Conclusion

1. Brief Introduction

A trading account helps you trade digitally and you can open trading accounts online instead of visiting a bank or the office of the broker. If you want to open a trading account, you must learn something about online trading.

Firstly, before trading online, you must make sure that you have enough risk capital and consider your trading goals and experience, and determine your investment style. Besides, you need to choose the brokerage company that suits you (pay more attention to the minimum deposit requirement, fees and available services). Finally, now that you've chosen a broker, it's time to inquire about the account opening process.

2. Before Online Trading

1) Invest with enough risk capital.

Capital at risk is money that can be invested at any time. Rather than use this money to pay living expenses, pay off debts, or save for retirement, this is money you could lose. Aside from your retirement account, most financial professionals recommend that you save up to six months' wages. Unexpected life events, such as losing your job or getting sick, can be covered by this financial cushion. The remaining money is your risk capital.

2) Think aboutyour trading goals and experience.

Online brokers cannot offer you the same level of services and expertise that offline brokers can, so you should consider these options before committing to one. You have two major options outside of online brokerages: money managers and full-service brokers.

Of all the broker options, money managers are the least hands-on. All your trades are handled by them, and they keep you updated about the progress and growth of your portfolio. Their management fees, however, are also high.

A full-service broker, on the other hand, offers a wide range of services. As part of the financial planning process, they sit down with you to determine your financial goals based on your age, retirement plans, marital status, personality, and risk tolerance. When you call and ask them to make direct trades for you, they will work with you to make investment strategies. In general, their fees are higher than those charged by online brokerages.

3）Identify your investment style.

When you still plan to invest, you'll need to determine what kind of trades you'll make online. You'll need a platform that's responsive and has low per-trade fees if you'll be doing more day trading. You can also make long-term investments with a platform offering more services at a higher level of trading fees.

3. Choosing Brokerage Companies

The second step in opening a trading account is to choose a brokerage firm after extensive research. If you are considering a brokerage, you should take into consideration its fees, interface, and value-added services before making a final decision.

1) Select suitable brokers.

Choose brokers who are most suited to your needs. It's important to ensure the brokers you hire are knowledgeable and responsive. The reputation of a brokerage is usually a better indicator of its reliability. Be sure to check the regulation of the brokerage before committing your funds if you decide to go with an obscure brokerage.

2) Make sure you meet the minimum deposit requirement.

For opening an account, you must first determine if your initial deposit amount meets the broker's requirements. Note that at the most time, brokers will offer different account types with different minimum deposit requirements.

For example, a broker may offer Basic, Silver, Gold and Platinum account types, and you want to open a Platinum account but cannot afford the minimum deposit amount. As a result, you cannot trade with it.

3) Pay attention to the fees related.

There is a wide variation in fees charged by online brokers. A broker may charge a commission on different trading assets (although the big discount brokers now offer commission-free trades), fees associated with dormant accounts, and others. Potential account holders will have access to this information from any broker. It is very important to visit the brokers website and learn something about their different fees and how they might apply to you.

4) Consider available services.

You can usually find more advanced research and analytical tools available from larger and more expensive online brokers. You may get your money's worth from these tools if you plan to trade quickly every day. When it comes to passive investing, you may want to find a more basic service with lower fees if you intend to be a more passive investor.

4. Trading Account Opening Procedure

Inquire about the procedure for opening a trading account after selecting a broker. Your chosen broker will require you to fill out an account opening form before you can register with them.

1) Go to “create a new account” or “register.”

The button “create a new account” or “register” will likely appear prominently on the broker's home page. You will be required to provide financial information and prove your identity during the application process. Some documents may also need to be scanned or faxed.

Most brokers require the following information and documents: personal information, such as your first name, last name, email address and password; and other information as requested.

Just take “pepperstone” as an example, you need to fill in your email address, account type, country of residence and password to create your account (as the below screenshot shows).

2) Deposit money to get started.

Your risk capital should be gathered into one account and deposited into your trading account. You may have to mail in a check if you want to make your first deposit with some brokers, while others will accept electronic funds transfers.

3) Try out the available trading tools and services

Explore the broker's platform and become familiar with its main trading tools. You should be able to see all of your current positions at once, but you should also see them individually. Don't be afraid to use all of the services you may need; you're paying for them anyway, so why not take advantage of them？

4) Make your first purchase after doing your research.

Though you may already have an idea of what you want to purchase, it is still a good idea to do your research first. Once you've decided what you want, place your first order and let your broker fill it. Diversification is the key to building a successful portfolio. Never put all your eggs in one basket.

5. Conclusion

As a whole, opening a trading account involves more than the process of opening an account; it also involves many trading tips that every trader needs to be aware of. For beginners, you've taken the first step toward learning how to open a trading account. Nevertheless, it is just the beginning, and you will face more challenges in the future. Like a baby learning to walk, you have to take baby steps, and along the way, you will fall, but you get back up and keep trying.