Choosing a Broker

When it comes to determining whether you need a full service or discount on your first attempt with your online trading, the choice is up to you. However, being in charge of your own portfolio can be a very rewarding and profitable experience. 

On the other hand, the full service-brokers also have their own time and space. Even if you pay more, it is much better than working out on your own portfolio because you lack understanding on the market.

The most important thing to keep in mind is that the type of online broker you choose should be based on your specific needs. Checking the background of the company is also very important.

Accounts and Orders

There are four types of account to choose from:

Cash Account:  This is the account where you deposit cash to buy bonds, stocks, mutual funds and more.

IRA Account: This is the type of account for those who are looking to set up an individual retirement account.

Margin Account: Margin Account basically allows you to borrow from your broker against the cash and securities in your account. However, using margin can reduce your profit quickly.

Option Account: Option account should only be considered by the seasoned investors. This will permit you to trade options, which is a riskier investment than bonds and stocks.

You have to be precise on how you want the transaction to be completed in order for you to trade.

There are common order types you will encounter when placing an equity order using an online interface or over the phone:

Market Order: This requires instant implementation at the best price accessible. These are also the cheapest trades to place because it requires little work from the broker.

Limit Order: This is an order where you need to transact at a specific price. This assures the amount at which you will buy or sell a security. Limit orders are generally more expensive than market orders.

Stop Order: A market order that trades after a stated level has been reached. This can be a stop-limit or stop-loss. Although the exact price cannot be assured, it can be a good way to protect your weakness in trading.

All or None: A requirement on a limit order either to buy or sell a security only if the broker can take up the entire order and not just part of it. 

Day Order: If this order is not filled, it will expire at the end of the trading day.

Good Till Cancelled: This buy and sell security will stay in effect until the customer cancels it or until it is executed by the broker.

Fill-Or-Kill: This order is for immediate implementation. The order will be automatically cancelled if it is not filled.

Short Sale: This short selling is a progressive investing strategy in which stock is on loan and sold, with the anticipation of returning the stock at lesser amount.

Buy to Cover:  This order is placed to close out a short position.

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