HOW TO OPEN A TRADING ACCOUNT
Trading account is an account with a broker that enables an individual or other party to buy and sell securities. Trading account is used as a way for an investor to purchase stocks, currencies, indices and bonds. This account is held by a financial institution and managed by the investment dealer. There are different types of trading accounts available, including cash accounts and margin accounts, both being a subject to special regulations. The assets held in a trading account are separated from companies’ accounts.
Every online process of opening a trading account is a bit different. The broker company needs to collect your personal information such as your full name, street address, phone number, e-mail address, social security number, date of birth, US citizenship status, place of employment, approximate annual income, net worth with or without your home, your federal tax bracket, and any previous market experience. You should answer these questions truthfully and accurately, e.g. about all your holdings, which include not only your bank account but also other physical assets such as vehicles or houses. The same applies to your trading experience. Incorrect information could result in you being exposed to more risk than you can handle and therefore the loss of funds can be greater than what you can afford.
Very often asked question when opening such account is, whether one should fund it from his own account? Definitely. Regulations you need to adhere to dictate that any funds invested need to come directly from your name and your name only, into an account that is set up in your name and your name only. You cannot use a check from a friend or family member to fund your account. The best way to fund your account is via a bank wire or credit card directly from your checking or savings account. Most brokers have a minimum deposit requirement for the opening of a new account, which may vary.
Most brokers will offer you margin for your trading account. Basically, you are given credit to purchase additional stock. With a margin account you are essentially borrowing money from someone, like getting investors into your trades. Remember, when you borrow, there is always going to be interest. Because margin allows for you to profit more than you put in, you also risk that you could lose more than you put in.
