Trading for Dummies® 2nd Edition

Chapter 3. Going for Broke(r): Discovering Your Brokerage Options

In This Chapter

• Discovering broker types and services

• Finding out about broker service options

• Sorting through different types of brokerage accounts

• Deciphering trading rules

As an individual, you can't trade stocks — or bonds, or options, or futures — unless you have a broker or are a broker yourself. That doesn't mean, however, that you have to work with a human being to trade stocks. Online brokers and direct-access brokers enable you to make trades electronically, so you never have to speak with a human being unless you're having a technical problem.

The differences between brokers are based on prices, services, and special capabilities. High-volume swing traders and day traders typically require the services of a direct-access broker, while position traders can and do trade successfully with more traditional discount, online, and full-service brokers. In this chapter, we help you understand the brokerage options that are available, the types of accounts you can establish, and the basic trading rules you must follow.

Why You Need a Broker

Unless you plan to get your brokerage license from the National Association of Securities Dealers (NASD) and set up shop yourself (which is hard — and expensive — to do), you need to work with a broker to be able to buy and sell stocks. How you choose a broker is based on the level of individual services you want. The more services you want, the more you pay for your ability to trade. ...