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What is an Active Account?

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  • Written By: Dana DeCecco
  • Edited By: A. Joseph
  • Last Modified Date: 11 September 2016
  • Copyright Protected:
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    Conjecture Corporation
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An active account refers to an open account with frequent transactions. The primary usage of the term refers to brokerage accounts. Active account status might also be associated with checking or charge accounts that have regular transactions. Activity in an open account generally results in revenue for the provider.

Online brokerage accounts require activity for the broker to earn revenue. This is accomplished by the account holder making trades. Brokers earn revenue by charging commission fees on a per-trade basis. The broker's main concern is promoting a large volume of trades. Some brokers charge an inactivity fee, because an inactive account provides no income for the broker.

Brokers might offer incentives to account holders who have elevated activity. Reduced commission fees are a typical incentive for increased activity. Free trades and assorted gifts are offered by some brokers. These incentives are often offered to traders opening a new account. Account referrals might be another popular incentive offered by brokers.

Many financial brokers concentrate on educational resources as an incentive to account holders. The reasoning is that an educated trader is more likely to be a productive trader. An educated trader will feel more confident and naturally will produce more trades and more commissions for the broker. These resources work to the advantage of the broker and the trader.

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Brokers might provide software programs for a trader who has an active account. Advanced charting programs might be an enticing feature for the active trader. Good charting programs lead to technical analysis skills. These skills might lead to trading systems and procedures that generate volume trades for the broker. Some programs might include proprietary technical indicators.

Many brokers will provide whatever it takes to motivate the account holder. Special news feeds and reports might be offered for free to an account holder with a specified volume of trades. Some incentives might be quite expensive for the broker, because a third-party provider might supply the services. Overall, the volume of trade commissions are expected to cover the cost of services plus a profit for the broker. Proprietary trading systems might even be provided by some brokers.

The scope of services and incentives provided by brokers is aimed at propagating active trading accounts. It is in the broker's best interest to have active and successful account holders. The investor with an active account has access to many services and resources that can enhance and improve trading skills. Active trading accounts often prove to be a profitable enterprise for all parties involved.

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