Frequently Asked Questions about online shares trading
Do you want to start online shares trading to make your fortune, but don't know how to get started? If you are planning to trade in a USA stock market, here are some basic questions you ought to be asking as you work towards your first trades.
Who can trade online?
Because this is on the World Wide Web, anybody, anywhere with internet access can get to the website of the online trading company. But you can't just turn up online and start trading. These days financial institutions have to watch out for money laundering so they will need to check who you are first by making you open an account.
Is it easy to get an account?
Because of the legal requirements on money laundering, the trading company has to take great care to identify anyone who wants to trade shares online. As well as asking you to complete an online application, they may want you to provide hard copy identification documents, so it can take some time before your application to trade can be activated. However, many trading platforms include a ‘paper trading' section where you can practice trading without risking real money, while you are waiting for your account to be ready.
Do I have to pay for an account?
Generally online trading sites don't charge for opening an account, that's not where they make their money. Instead, they charge per trade, just like a regular broker. They may charge a fixed amount per trade, or a range depending on the size of the trade. You need to take this into account when you are choosing your trading platform – consider how big a price movement you need to get the return you are looking for after the cost of the trade.
Do I have to make a deposit before I trade?
You will have to fund your account before you can make a trade, and the amount in your account has to be enough to cover the cost of the shares you are buying, together with the charge for making the trade. If you bid to trade at a fixed price, then the amount required is clear, but if you say you want to trade at the market price, you will need to have some extra in your account because of possible price fluctuation before your trade is executed.
How do I make a trade?
Once you have selected your trading platform, opened your account, and added some funds, making a simple trade is really quite straightforward: enter the stock symbol for the shares you want to buy, choose to buy at the market price, or specify a maximum price you will pay, or choose to buy when (if) the price falls to a value you specify; then say how many you want to buy. Some trading platforms will let you choose to say that your offer is only valid for the current day or that it should stay open until your trade completes. Some platforms will let you make a succession of trades that depend on each other, such as sell one stock when it reaches your target price, then once that has happened bid to buy another stock at some price you choose. Remember that when you place an order you are bidding in an open market where the prices are changing all the time, and there has to be someone on the other end of the trade willing to accept your bid.
How much does it cost to trade?
You should expect to be paying somewhere around $10 - $15 (USD) per trade. You may find higher and lower prices offered, but check the small print – the low price might be for a certain size of trade, with a higher price for the trade you actually want to make; also the higher prices might give you something in return, such as live stock tickers for instance.
How do I get paid?
In the same way that your trades will be funded from your account, your returns will be credited back there too. When you make a sale, the balance of the proceeds, less the cost of the trade – it costs to sell as well as buy! – will be added to your account. You can use those funds to make more trades, or you can extract the funds as cash.
Who can trade online?
Because this is on the World Wide Web, anybody, anywhere with internet access can get to the website of the online trading company. But you can't just turn up online and start trading. These days financial institutions have to watch out for money laundering so they will need to check who you are first by making you open an account.
Is it easy to get an account?
Because of the legal requirements on money laundering, the trading company has to take great care to identify anyone who wants to trade shares online. As well as asking you to complete an online application, they may want you to provide hard copy identification documents, so it can take some time before your application to trade can be activated. However, many trading platforms include a ‘paper trading' section where you can practice trading without risking real money, while you are waiting for your account to be ready.
Do I have to pay for an account?
Generally online trading sites don't charge for opening an account, that's not where they make their money. Instead, they charge per trade, just like a regular broker. They may charge a fixed amount per trade, or a range depending on the size of the trade. You need to take this into account when you are choosing your trading platform – consider how big a price movement you need to get the return you are looking for after the cost of the trade.
Do I have to make a deposit before I trade?
You will have to fund your account before you can make a trade, and the amount in your account has to be enough to cover the cost of the shares you are buying, together with the charge for making the trade. If you bid to trade at a fixed price, then the amount required is clear, but if you say you want to trade at the market price, you will need to have some extra in your account because of possible price fluctuation before your trade is executed.
How do I make a trade?
Once you have selected your trading platform, opened your account, and added some funds, making a simple trade is really quite straightforward: enter the stock symbol for the shares you want to buy, choose to buy at the market price, or specify a maximum price you will pay, or choose to buy when (if) the price falls to a value you specify; then say how many you want to buy. Some trading platforms will let you choose to say that your offer is only valid for the current day or that it should stay open until your trade completes. Some platforms will let you make a succession of trades that depend on each other, such as sell one stock when it reaches your target price, then once that has happened bid to buy another stock at some price you choose. Remember that when you place an order you are bidding in an open market where the prices are changing all the time, and there has to be someone on the other end of the trade willing to accept your bid.
How much does it cost to trade?
You should expect to be paying somewhere around $10 - $15 (USD) per trade. You may find higher and lower prices offered, but check the small print – the low price might be for a certain size of trade, with a higher price for the trade you actually want to make; also the higher prices might give you something in return, such as live stock tickers for instance.
How do I get paid?
In the same way that your trades will be funded from your account, your returns will be credited back there too. When you make a sale, the balance of the proceeds, less the cost of the trade – it costs to sell as well as buy! – will be added to your account. You can use those funds to make more trades, or you can extract the funds as cash.