- Your online trading account may be categorized as either a cash or a margin account. With a cash account, you will purchase investments only with the money that you deposit into the account. With a margin account, you can borrow money on a dollar-for-dollar basis from your broker to double your buying power for acquiring stocks. For example, you can deposit $5,000 into the margin account to buy $10,000 in stocks -- with the help of a $5,000 margin loan. You must also open up a margin account to sell stocks short. When selling a stock short, you borrow shares from another investor and immediately sell them for cash. At a later date, you will re-enter the market, buy back the same shares and replace the original loan. When going short, you make money as share prices decline.
- Your online account will present an easy-to-use trading interface directly accessible from the homepage. To trade a particular stock, you will enter its ticker symbol into the trading tab. If you do not already know the ticker symbol, you will be able to look up that information through the online trading tab. After entering the ticker symbol, you will input the amount of shares that you wish to buy or sell. From there, the online trading portal will calculate the size of your total investment or sale before you submit the order. When the trade clears, you will view a confirmation statement on screen -- to summarize the transaction.
- The online trading account presents your stock market positions and cash balances in real-time. The accounting tab will also produce monthly statements that document each deposit made into the account. Online brokerage deposits will include cash deposits from personal checks, dividend income and interest payments. At tax season, you will receive 1099 forms in the mail from your online brokerage. The 1099 forms will help you claim and pay taxes on capital gains, interest and dividends.
- The Securities and Exchange Commission (SEC) warns online trading consumers against identity theft. Through phishing scams, criminals steal your personal information to access your trading account to place unauthorized trades and balance transfers. To protect your account from identity theft, you should install virus protection software on your computer and carefully monitor your monthly statements. You should report any suspicious transactions that have occurred to your online trading firm as quickly as possible.