If you want to trade us stocks for short-term profits or invest for longer-term growth you will need a stock brokerage account.
There are a plethora of online stock trading providers in the US and all are basically the same, but with subtle differences that will determine if they are right for you.
If you are looking for a broker you can compare American stock trading brokers here as it’s worth doing your research and comparing key features before applying for an account.
How do I know which brokerage account is right for me?
First you need to decide how you want to trade. Is it for quick profits, long term investing, will you be an active trader, do you need access to futures and options too???
The key is to find a brokerage account that matches your investment goals.
Most investors and traders will have two or three different stock brokerages accounts as brokers change their offering, products and fees on a regular basis.
It’s important to have flexibility in your account types as with the investments you hold in it.
Most brokers offer pretty much the same thing these days, so look and feel of the trading platform and broker website is becoming one of the most important features. As such brokers are trying hard to make the customers user experiences as fluid as possible these days.
Most stock brokers will also offer access to these investment products?
If you think you need them you can compare the features on offer from the major US brokers here but here is a breakdown of the key additional products you can trade:
- One of the simplest forms of investment, you buy into companies through stock purchases and either hold in the short term or for retirement. Good for long term growth and short term price movement speculation.
- By investing in bonds you own some of the company’s debt and receive regular interest payments. Good if you are looking for a stead stream of income from your investments.
- You can speculate on the price of cryptocurrencies through a stock broker rather than directly through cryptocurrency exchange. By doing so you get a little more protection as stock brokers are regulated whereas cryptocurrency exchanges are not. Good if you like taking very large risks and are prepared to lose all your money if things go wrong quickly. Note, crypto currencies are very volatile and are as yet an unproven investment asset class.
- Exchange Traded Funds allow you to invest and speculate on things that are not companies like Gold, EURUSD and Crude Oil through the stock market. So instead of trading high risk futures and options you can buy fully paid up stock. ETFs usually consist of a basket of stocks and derivatives that relate to a certain industry. For example a Gold ETF will track the price of gold by holding a selection of gold mining stocks, gold futures and some gold options.
- You can also speculate on the foreign exchange market through most brokerage accounts. This can be done through ETFs as above or through margin products like futures and options. Or more commonly through SPOT FX. You can compare US FOREX accounts here.
- The futures market is a regulated environment where you can speculate on the price of a commodity or index without actually owning it. For instance, through an American futures broker you can trade the price of the S&P 500 through CME E-mini S&P 500 futures. You will have to make a small deposit (called margin) for each future you buy, then for every tick it moves you either make a profit or loss. When you close the position you bank your profit (or take your loss) and get your deposit back. Note. Futures are very high risk so are only for experienced investors.
- Through a US options broker you can speculate on the price of a stock or commodity without actually owning it (much the same as futures) but with a few differences. Unlike futures your downside is limited (if you are a buyer) because what you pay is called a premium. If you are trading options the premium is the price you trade which can either go to zero or up. The premium will be based on the time to the options expiry and the price of the underlying asset relative to the strike price of the specif option. For more information on options brokers and how options work see our options broker comparison section.
- Mutual Funds
- Are great if you have long term investment goals. Mutual funds are diversified so are in theory safer investments that single stocks. Mutual funds essentially pool cash, bonds, derivatives, stocks and other investment products to achieve a specific goal. For instance, provide regular income, look for long term growth at varying degrees of risk and focus on specific domestic and foreign markets. See here to find a mutual fund broker and for more information.