Online brokers provide a very simple and easy solution for do-it-yourself traders and investors who prefer managing their own portfolios rather than paying someone to do it for them. Nowadays, traders can buy and sell stocks, forex currencies, commodities, indices and a ton of other assets on their own with a simple click of a button and this allows them avoid the many costly commissions that are charged by managers. The only problem is that there are dozens of online brokerages out there and it is important to know what to look for in order to choose the right one.
Some of the things that you should do in order to make the best choice are:
- Do thorough research
The best thing for today’s traders is that there has never been more information available related to financial markets. The problem is tracking down timely and useful information can be expensive and difficult. There are online brokers that provide some form of market research, but the quality and the quantity of this research varies. Experienced investors already have access to third-party resources, but inexperienced investors need to consider if they expect their investor to keep them informed about the market.
- Know the fees
Trading is all about making money and every cent that you lose in fees just eats into your returns. The good news for traders is that pricing wars amongst online brokers has driven trading fee lower in the last couple of years. Nonetheless, basic commissions still vary significantly from one broker to the next. You don’t want to end up with heavy trading fee because this will take away your motivation to trade. There are popular online brokers like HFTrading that charge reasonable and affordable trading fee to motivate their clients to trade more. Similarly, there are some brokerages that claim to charge low per transaction cost, but charge hidden fee like account transfer fee and inactivity fee.
- Look at the asset classes
Standard online brokers offer bonds, stocks, mutual funds, options and ETFs to traders, but if you are one of those looking for diversification, then you may not be happy with these options. Fortunately, certain brokers give their clients access to international markets, such as currency exchanges, cryptocurrencies, futures trading, derivatives and OTC-listed stocks. If you intend to venture out from the traditional markets, then you should make sure you find a broker that can offer you the asset classes you are interested in.
- Check out mobile options
With technological advancement, traders want to be hands-on with their trading portfolios. They prefer to have 24/7 access to their account anywhere they go. In order to make this happen, you should choose a broker that offers an easy-to-use mobile app for trading. Mobile trading gives traders the advantage of being able to make trades whenever they want. They could do so during their lunch break or during a train ride to work. It also allows traders to stay abreast of all the latest changes and happenings in the market at their convenience. Having a top-tier mobile app gives traders the security of having access to their portfolio in their pocket regardless of where they are.
- Read the reviews
As in the case of any online product or service, customer reviews can provide the best insight into whether online brokers can deliver on their promises or not. It is perfectly normal for every broker’s website to make big claims to make itself sound great, but only their clients can provide unbiased accounts of their first-hand experience with the platform. Hence, when you are in the market for a brokerage, you should pay special attention to the customer reviews. Keep an eye out for complaints related to customer service or hidden fees. Reputable brokers like HFTrading are always upfront about their commissions and fees and will have positive reviews to confirm this.
- Remember margin
If you plan to make investments on margin, then you definitely need to pay attention to margin rates. The interest rates charged by brokers on margin accounts can be between 1% and 10%, depending on the size of the account and the broker. Margin fee can offset any gains that you might make in the market due to which it is necessary to check margin rates before you finalize a broker.
- Check the trading platform
Lastly and yet most importantly, you need to check a broker’s trading platform before committing with them. Some trading platforms can be very complex or have security loopholes and you don’t want any such options. Always look for a broker that gives you access to a comprehensive and advanced trading platform that’s equipped with the right tools and features that can help during the trading process.
With the help of these tips, you will be able to choose an online broker very wisely.