What you need to know when opening your first trading account

It’s easy to open an online trading account. Many brokers/trading platforms provide various services and a wide range of assets, have different interfaces, and are legal in many countries. It’s not surprising – after all, the worldwide online trading platform market was worth around $8.6 bn in 2021.

However, before starting researching tons of accounts, you should know some key factors that will help you make a choice. 

Account types

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There are some account classifications to keep in mind. 

1. Demo and real 

A demo trading account is used to examine the platform’s interface, practice strategies and methods, test indicators, and analyze price actions. When using a demo account, you aren’t using your own funds. A broker or a trading platform provides you with fake funds just for testing purposes. There are no trading account age limits or initial investments since you don’t get real returns. 

A real account has stricter rules. You must pass identity or age verification, as real trading is available only for individuals over 18. This type of account allows you to open real trades and get returns if your price forecasts are correct. Most brokers/trading platforms don’t require an initial deposit to open a real account. Still, this requirement arises when you start trading, even with leverage.

2. Cash and margin 

Cash is an account that requires an investor to pay the total amount of assets they invest in. This account type suits you if you plan to open small positions. Also, it limits losses if your forecast is incorrect. 

A margin account is the most common account type, and almost every broker or a trading platform provides it. You can open a trade with just $100. The rest is provided by your broker or a trading platform and is called leverage. When trading with leverage, you increase the number of opportunities to trade different assets at once and can open positions of any size. However, there is a big pitfall—larger funds lead to more significant losses. 

Key points when choosing a trading account

Now you know what the account types are and can select them precisely. Next, review these key points.

1. Payment methods

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You should start with payment methods to be sure you can deposit funds via bank transfers, cards, digital wallets, or any other method you have. Also, you should check what withdrawal methods the broker or a trading platform supports. There can be issues if the firm does not support your payment methods. 

2. Trading account assets

If you are ready to trade, it’s likely you know what assets suit your trading approach the most. Usually, brokers/trading platforms offer many financial instruments, including stocks, cryptocurrencies, currencies, and metals. However, some focus on specific assets. Start by checking what assets the broker or a trading platform offers. 

3. Margin account

It’s likely that you will open a margin account. Check what leverage ratios the broker or a trading platform offers and what initial requirements it has. If you have $100 and a broker or a trading platform only offers 1:10 leverage, it’s unlikely that $1,000 will be enough to trade for the long term. 

4. Commissions and fees

Some brokers/trading platforms take fees for providing leverage if you hold a position open for at least one night. Also, a broker or a trading platform may charge account maintenance or inactivity fees. Remember there is a spread that is taken for every trade you open. 

5. Minimum account balance requirement

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Some brokers/trading platforms may require you to deposit a certain amount to open an account, and you can’t cross under the minimum throughout the year. Different brokerages may have different minimum balances or may not have this requirement at all. 

6. Friendly interface

When opening your first trading account, you’ll experience various feelings, from joy to anxiety. You don’t know how to open the first trade, where to deposit funds, and how to reduce potential risks. Therefore, the platform’s interface shouldn’t be an additional problem for you. Open a demo account to test its functionality. 

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There are minor requirements to open an online trading account, including age and initial deposit. Moreover, numerous brokers/trading platforms allow you to trade different assets with leverage. However, to avoid issues, you should do a comprehensive analysis.

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