Brokers and accounts
The company that lets you trade, and how an account works.
What a broker does
You can't walk into the stock market and buy a share by yourself. You need a : a company that sends your orders to the market for you.
Think of a theme park. The rides are the market. You don't just walk onto a ride. You go through the gate first, and the gate lets you in. A broker is your gate into the market.
What an account is
To trade, you open an with a broker. It's like a piggy bank that lives in the broker's app.
- You put money in. That's a .
- You use that money to buy things, like shares.
- The cash you have left and the things you own both stay in the account.
- When you sell, the money goes back into the account. Taking it out is a .
Your is how much the whole account is worth right now.
Kids and accounts
In most places, you must be 18 to open a trading account by yourself. Before that, a parent or guardian can open a special account for you, often called a . The grown-up is in charge of it until you're an adult.
How brokers make money
Brokers are businesses, so they get paid somehow:
- A : a small fee when you buy or sell. Many stock brokers charge zero for stocks now. Futures brokers almost always charge a fee.
- A tiny piece of the gap between buyer and seller prices. You'll learn about that gap in the next lesson.
- when they lend you money, or on cash sitting in your account.
So "free" trading isn't totally free. Always read the list of fees.
Picking a broker
You don't need to pick one now. But when the time comes, a grown-up should check:
- Is it regulated? That means a government watchdog keeps an eye on it. In the US, stock brokers are checked by the SEC and FINRA, and futures brokers by the CFTC and NFA.
- Does it have what you want to trade? Not every broker offers stocks, futures and crypto.
- What are the fees?
- Does it have a practice account? That's two lessons from now.
Be careful online. Anyone who promises you'll get rich fast, or asks you to send money to a "secret" trading account, is not a real broker.
Remember
- A broker is your gate into the market.
- An account holds your money and the things you own.
- Under 18, a grown-up has to open the account for you.
- Brokers charge fees, so "free" isn't always free.
Check yourself
1. What does a broker do?
2. What is putting money into your account called?
3. In most places, how old do you need to be to open a trading account by yourself?
Next lesson: Ways to place a trade
Money Tree School is education, not financial advice. Examples use made-up or historical numbers to show how things work; they are not recommendations to buy or sell anything. Markets can lose money.