There are two options when opening files from SharePoint Online; with Office desktop apps or Office web apps.
Opening with Desktop Apps
1. Navigate to the file on SharePoint Online.
2. Select the More Actions icon.
3. Select Open and then Open in App.
4. There will be a notification pop-up confirming you are opening another application. Select Open. You can also Select the checkbox to avoid the pop-up in the future.
Opening with Web Apps
This is default method of opening files.
1. Clicking on the file name will open it up in a new browser.
Opening from Desktop Applications
1. From within the Office Application (Word, Excel, etc.), select Open.
2. Select Sites.
3. Browse to the file you need to open.
You can right click on a folder and Pin a folder you use frequently. The pinned folder will be found under Recent.
Learn more on the Patriot Knowledge Center: Microsoft SharePoint