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Trading Account

trading account guide 1024x532 - Trading Account: What Is It and How Do I Open One?

What is a trading account?

what is a trading account 1024x527 - Trading Account: What Is It and How Do I Open One?

A trading account is an investment account. It is a platform that allows you to buy and sell stocks, ETFs, derivatives, options and other assets. These trades are made in the stock market. Some trading accounts will also let you buy and sell cryptocurrencies. With a trading account, you can buy and sell financial assets as frequently as you want.

Simply put, individual investors like you can buy and sell stocks through trading accounts. Some of the brokerage companies in Germany that offer trading accounts include Comdirect, DKB, and Trade Republic. Your brokerage company is required by law to show you the best price available and tell you any commissions or markups they charge you.

Features and Benefits of Trading Accounts

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Features and Benefits

With a trading account, you can buy and sell shares. There are an increasing number of investment apps that allow you to make trades directly from your smartphone. Many trading accounts will organize stocks by sector or category. For example, you can see companies with female CEOs or companies in the tech industry. With mobile brokers, you can compare stocks side by side and view portfolio values, watch lists, transaction history and account information. Trading accounts allow you to make trades in the stock market in real time. You can maximize your profits with no delays. 

  • Buy and sell shares on the phone or online
  • Investment apps that let you make trades directly from your smartphone
  • View stocks organized by sector or category
  • View portfolio values, watch lists, transaction history 
  • Make trades in real time
  • Maximize your profits with no delays

What can I trade with a trading account?

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With a trading account, you can buy and sell stocks, ETFs, derivatives and other assets. Some trading accounts let you buy and sell cryptocurrencies such as Bitcoin.

Stocks

A stock is a share of ownership of a publicly-traded company that is traded on the stock market. When you buy stock in a company, you automatically own a percentage of the company. With a trading account you can buy and sell stock of publicly-traded companies. 

ETFs

An Exchange Traded Fund (ETF) is a fund made up of several investments. Some people want to buy stock in just one company. Other people want to buy stock in one type of company. People that want to buy stock in one type of company would invest in an ETF. When you invest in an ETF, you are investing in a sector, industry, or region so you don’t have to just invest in one company. Some ETFs are for specific industries, such as automotive, tech or energy. Other ETFs are for certain regions, like the European stock market or emerging market stocks. The benefit of an ETF is that you can invest in an entire sector without have to choose just one company. You can buy and sell ETFs in the same way you would with a stock.

Derivatives

A derivative is a contract between two or more parties that is based on or derived from an agreed upon asset. The parties decide what the asset will be. For example, the asset could be stocks, bonds, currencies, or interest rates. Derivatives were originally used to guarantee an exchange rate for goods traded between different countries. For example, let’s say a US company sends a shipment of goods to England. In this case, the US company would make a derivative with an investor that ensures the exchange rate is fair to both the US company and the investor. If the investor guessed that the exchange rate would stay the same, but in fact the exchange rate decreased, then the investor would lose money. To the contrary, if the exchange rate increased then the investor would make money. 

Options

An option is a type of derivative that many trading accounts will let clients buy and sell. Options are a contract issuing rights to the buyer to buy or sell an asset with a preset date. There are two types of options: call options and put options. Call options gives you the right to purchase a stock at a determined price at a specified time. A put option gives the owner of an asset (such as a stock) the right to sell the asset at a certain price within a specific period of time. 

Cryptocurrencies

A cryptocurrency a type of money that only exists electronically. It works similarly to ordinary money, such as dollars, pounds, euros, rupees, yen, etc. The biggest differences between cryptocurrency and ordinary money is that cryptocurrency has no physical counterparts (banknotes/coins) and is not regulated by a central authority. Examples of cryptocurrency include Bitcoin, Ethereum, Ripple, and Litecoin. Some trading platforms, such as Robinhood, will let you buy and sell cryptocurrency. 

How to Choose the Best Trading Account

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Choosing a Trading Account

A consumer-friendly trading account should be cheap. This means that there should be low fees for the user. In fact, an increasing number of investment apps with trading accounts offer commission-free trades. Furthermore, the best trading accounts are easy to use. The interface should be easy to understand and buying and selling stocks should be simple.   

Many people choose to open trading accounts with mobile brokers because they’re really convenient and easy to use. A good trading account will let you view stock market data, watch lists, charts and news all on the investment app. You should be able to see quotes and information, such as the market depth of a security, with automatic real-time updates from the app. To sum this up, the best trading account offers commission-free trades and an easily understandable app to buy and sell stocks. 

  • Commission-free trades
  • User-friendly interface
  • Easy to buy and sell stocks 
  • View stock market data directly from the app
  • Push notifications and price alarms

How to Open a Trading Account Online

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Open a Trading Account

How you open a trading account partly depends on which country you’re from and the brokerage company you use. The first step is comparing different brokerage companies to find the one with the best features and benefits. After you choose the brokerage company that you want to open the trading account with, you will start the actual process of opening the account. If you’re opening an account with a German brokerage company, then you will need a valid ID document (ID card or passport) and valid documentation to show that you have permanent residence in Germany. You must also show that you’re taxable in Germany. If you’re opening an account with an American brokerage company, then you will oftentimes need documents that show you’re a US citizen.

After you submit your documents, you will either receive confirmation that your application’s been approved, or that you need to provide more information. After your application is approved and you open your account, you can start researching investments. Then you can buy and sell stocks, ETFs, options and other assets! 

Documents Required

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You must have the following documents and fulfill the following requirements to open most online/mobile trading accounts in Germany:

  • A valid ID document (ID card or passport)
  • You are at least 18 years old
  • Document showing where you have permanent residency
    • For some trading accounts, you must have permanent residency in Germany
  • German bank account
  • A smartphone with the operating system iOS or Android
  • A working cell phone camera
  • Stable internet connection

BEST 3 Trading Accounts in Germany

Trading account germany - Trading Account: What Is It and How Do I Open One?
  • Country of Regulation
  • German Residencey Required
  • Account Fee
  • Deposit Fee
  • Withdrawal Fee
  • Online Account Opening
  • NO Minimum Deposit
  • Demo Account Provided
  • German Market Stock Fees Per Trade

flatex trading account - Trading Account: What Is It and How Do I Open One?
  • Germany
  • NO
  • €0
  • €0
  • €0
  • €3.80*

comdirect trading account - Trading Account: What Is It and How Do I Open One?
  • Germany
  • NO
  • €0
  • €0
  • €0
  • €3.90*

Flatex

What can you trade?

With Flatex, you can trade stocks, ETFs, Forex, funds, bonds, CFDs, warrants, certificates and turbo. 

Fees

* For new customers, the fee for trading stocks is €3.80 for the first 6 months. After 6 months, Flatex charges €5.90 per trade. 

Opening An Account

If you have permanent residency in Germany, then you can open a Flatex trading account online. If you don’t have German residency, then opening a Flatex trading account can take as long as 2 weeks and include getting documents notarized. If you’re not a German resident then you will have to mail your notarized documents to Flatex.

Safety

The Flatex trading account is considered a safe option. It is regulated by BaFin, Germany’s Federal Financial Supervisory Authority. Since March 2019, Flatex provides brokerage services through Flatex bank AG. With a Flatex trading account, you have protection for up to €110,000 for cash deposits and €22,000 for securities.

What else should I know about the Flatex trading account?

If you have a Flatex trading account, then you have access the German market, the EU market and overseas markets. To be specific, Flatex gives you access to markets in Canada, the United States, Belgium, Portugal, France, Netherlands, Italy, Austria and Switzerland. Unlike Trade Republic, the Flatex app is only available in German – you cannot switch the language settings to English. Customer support is mainly in German. You might be able to talk to someone from Flatex customer service over the phone in English, but it is not guaranteed. Flatex offers general educational videos and webinars in German to help you learn more about trading.

Comdirect

What can you trade?

With Comdirect, you can trade stocks, ETFs, bonds, funds, certificates, options, futures, warrants and CDFs.

Fees

* For new customers, the fee for trading stocks is €3.90 for the first 12 months.

Afterwards, the fees get more expensive. The fee for trading stocks on the German market is 0.25% of the trading amount plus a base fee of €4.90. The minimum fee total is €9.90 and the maximum fee total is €59.90. In other words, Comdirect will charge at least €9.90 in fees per trade, but not more than €59.90.

 

For trading stocks on non-German markets, the fee is 0.25% of the trading amount plus a base fee of €7.90. The minimum fee total is €12.90 and the maximum fee total is €62.90. This means that every trade you make will have at least a €12.90 fee, but not more than €62.90.

Opening An Account

Opening an account with Comdirect is easy and online for residents of Germany, Austria and Switzerland. If you are not a resident in one of these three countries, then you have to do the identity check in a branch of Deutsche Post AG (PostIdent).

Safety

Comdirect is considered a safe option for anyone that wants to open a trading account. The German Federal Financial Supervisory Authority (BaFin) regulates Comdirect. If you have a Comdirect trading account, then you have protection for up to €100,000 for cash deposits and €20,000 for securities. Comdirect is listed on the Xetra and London Stock Exchange (LSE).

What else should I know about the Comdirect trading account?

Comdirect was founded in Germany in 1994. It is owned by Commerzbank, which owns 80% of Comdirect’s shares. With Comdirect, you have access the German market, the EU market and overseas markets. More specifically, Comdirect gives you access to markets in Australia, France, Great-Britain, Italy, Canada, Netherlands, Sweden, Switzerland, Spain and the United States. Something that sets Comdirect apart from other trading accounts is that it offers trading for a lot of different cryptocurrencies. In fact, with Comdirect you can trade up to 10 different cryptocurrencies: Bitcoin, Ripple, Dash, Monero, Ether Classic, Ethereum, Bitcoin Cash, Litecoin, NEO and Zcash.

Trade Republic

What can you trade?

With a Trade Republic account, you can trade stocks, derivatives and ETFs.

Fees

Trade Republic has the lowest (and simplest) fee for trading stocks: €1 per trade.

Opening An Account

Opening a Trade Republic account for German residents is really easy and usually takes less than 10 minutes.

To open a Trade Republic trading account, you must be a permanent resident in Germany, be tax liable in Germany and be at least 18 years old. You also need a German bank account and cell phone number. Trade Republic does not accept customers who are US citizens or taxable in the United States (so-called FATCA customers). 

Safety

Trade Republic is a regarded as a very safe trading platform. Bundesbank and BaFin (Federal Financial Supervisory Authority) supervise Trade Republic. All trades take place on the electronic trading system London Stock Exchange (LSE), operated by the Hamburg Stock Exchange. The price quality is monitored by the Hamburg Stock exchange. Derivatives are traded over-the-counter directly with the issuer HSBC Germany. Your money is kept in a trust account with solarisBank, a banking-as-a-service platform with a German full banking license.

What else should I know about the Trade Republic trading account?

One of the perks of the Trade Republic trading account is that the trading app is available in both English and German. As with Comdirect and Flatex, however, all documents, bills, etc. are only available in German. The Trade Republic trading account was originally designed exclusively for use on smartphones, but you can use the app on your tablet. Another perk of Trade Republic is that it has really long trading hours. You can trade stocks and ETFs from 7:30 a.m. to 11:00 p.m. and derivatives from 8:00 a.m. to 10:00 p.m. on the Trade Republic app. Trade Republic offers more than 7,300 stocks, over 500 ETFs and around 40,000 derivatives. Unlike Comdirect, Trade Republic does not offer trading for Cryptocurrencies.

Frequently Asked Questions

  • What is the difference between a cash account and a margin account?

    Types of Trading Accounts Cash accounts and margin accounts are the two main types of trading accounts. With a cash account, all transactions must be made with cash that is available in your account. If you don’t have enough cash in your account then you can’t buy the stock. With margin accounts, you can borrow money against the value of the stocks and other financial assets in your account. This gives you more freedom with your investments because you can buy more stock through borrowing than you could buy with your available cash. 

  • What is a demo trading account?

    Demo Accounts Some trading platforms offer demo accounts. With demo accounts, you use fake money to experiment with the trading platform and its features. You can then decide if you want to set up an real account with your actual money. 

  • What are managed forex accounts?

    A managed forex account is a trading account where a professional trader (money manager) trades on the client’s behalf. If you have a managed forex account then you hire a professional forex trader to manage your investments. 

  • What is a demat account?

    A demat account is closely tied to a trading account. With a trading account, you can buy and sell shares in the stock market. The demat account functions as a bank where you can keep your shares that you buy.  For example, let’s say you have €3 in your wallet. You go to the store and tell the seller that you want a bag of chips. You check the price of the chips and finalize the transaction. Then you take the money from your wallet and give it to the seller. In this example, the wallet is like your demat account and you’re the trading account.