Online trading has revolutionized the stock market. Instead of being an obscure concept that seemingly only a select number of brokers in New York have access to, it is now available to anyone that is over 18 and wants to set up an account. There are a number of different platforms to do so; in fact you have certainly seen their advertisements (think: talking baby in the SuperBowl ads). What some people do not know is just how easy it is to use one of these accounts. Possibly the hardest part about trading online is actually setting up the account. There is some wording that can be a bit obscure (for instance a regular account is called a margin account), and if there is no branch for you to walk in to, you could be stuck calling a toll free number. But once the account is set up you can link it to your bank account, the rest is easy.
There are two parts to an online trading account
One is the money market account; this is where any money that is not currently invested is stored. It will earn you a small interest (usually whatever the average savings rate is) while it is sitting and waiting to buy into a security. The other part to the account is comprised of your holdings. Through an online brokerage account you have access to just about every security imaginable. Just keep in mind that every trade comes with a commission. So if you buy $10 worth of stock, you may pay about $10 in commission to buy it. Then when it comes time to sell, you will pay another $10 in commissions. So your $10 purchase really costs you $30. To minimize this you need to be able to purchase enough shares to make the commissions relatively minimal. It is easy to sell shares online; the hard part is understanding some of the jargon that goes along with them. For instance, you can place a market order (buy or sell at whatever the current price is), or you can use a stop or limit order to make sure you get the prices that you want on your buys and sells. There are ways to get fairly fancy with your online trades; it is up to you how you pursue them.
Buying and selling shares online is easy
It’s probably obvious to most, but buying and selling shares online is easy…really easy. And it is a lot cheaper than using a traditional broker (someone that may charge as much as $50 or $75 per trade). Setting up an account would be well worth your time if you want to get into trading individual issues. You can learn about the market, and you can watch your dollars grow due to your own homework and research. Just be aware, nothing is guaranteed, you could lose money.
Interesting–I’m definitely going to look more into this. I’m finally getting comfortable enough to make the switch to online financial decisions. My main concern has always been security, but it seems like a lot is changing and improving in that area!
The thing is, even if you go to your broker and place an order, they enter it all online anyway. Granted their software is heavily protected, but it is also more heavily attacked. I have never felt unsafe trading online.
Merrill lets you trade upto 30 times a month without paying a commission – makes it much easier to trade in smaller lots. The rub is that you need to have $25,000 balance in your Merrill or BoA account.