When you are trading on an online platform, it is vital to choose the right broker. While most brokers offer similar services, it is important to be aware of what they can do for you and how they can help you achieve your financial goals. Trading stocks online can be a very lucrative way to earn money. However, when you trade without the proper guidance and knowledge, it is easy to lose out on profits or worse, suffer financial losses. The fact of the matter is that online trading comes with its fair share of potential risks.
The complexities of the market can be quite daunting and if you don’t do your homework or put in the time and effort, then your trading endeavors could go south. However, there is also ample room for profits and opportunities. Quite often though, a lot of online trading platforms and brokers cannot just seem like a dime a dozen, but also appear quite indifferent from each other. So, the key question that then comes to the fore is, what does one look for in a good broker? And equally as important, how do you choose the right one?
Establish your needs
Before you go ahead and click on a brokerage’s ad, of which there are many these days, take a moment to question your expectations from their trading platform. Your investment objectives will also influence your choice. If you’re fresh-faced and hoping to coin it, then you might want a platform that provides basic educational resources, detailed glossaries, readily available customer support service and a demo account. Demo accounts are incredibly helpful, especially if you’re a novice trader.
This type of account won’t cost you anything and will help you to at least become acquainted with the whole trading setup, but mainly from a cursory perspective. For instance, you might have an interest in market indexes, and this in turn will require a demo account belonging to brokers that offers indices trading. You’ll then be able to explore the FTSE 100 or the S&P 500 at no cost.
If you’re a more experienced trader, then you might seek out a platform that offers resources penned by professional investors, high-level education resources, and an even selection of basic and technical data. If you’re a truly experienced investor, then you might be seeking out something that will allow you to focus on earning a passive income or making sure you can retire comfortably.
A user-friendly platform
Nobody wants a complicated affair, especially when faced with the volatile and complex instruments of the financial market. Ideally, an online trading platform should be able to function in a capacity that lets the trader easily execute their trades, while not being cumbersome, clunky or over-complicated.
If the platform appears too complex from the very start, the odds of it turning a beginner away are high. On the other hand, if the user interface is simple to follow, then it will serve to encourage the user. While the majority of trading gets done on a traditional PC, most brokers offer a smartphone app also, thus not confining traders to one type of device only.
When choosing to trade online, be sure to choose a broker that ticks all the boxes in terms of being regulated and thus reputable. After all, you’re going to be depositing your money into an online account. You want the assurance of safety and regulation. Depending on where the broker is located, will determine the regulatory authority. For instance, if the broker is based in the UK, then it should be regulated by the FCA (Financial Conduct Authority).
If the broker is based in the US, then it should be registered with the SEC (Securities & Exchange Commission), and if the broker is based in Europe, then it should be regulated by the ESMA (European Securities & Markets Authority).
The next attribute of safety you should be aware of is online security and account protection. For instance, does the broker provide two-factor authentication? In other words, in addition to your password, does your online trading broker provide an additional veil of security? Prime examples of this additional layer of security includes time-sensitive codes sent via email or text message.
Savings can be an afterthought when it comes to investing, but it shouldn’t be. Depending on the type of investment you choose, your fees could end up cutting into your long-term returns. Before you make any financial decisions, get informed about the different types of fees and how they impact your portfolio over time.
It may be tempting to avoid paying commissions by using a discount broker, but if you aren’t properly prepared, these fees can quickly add up and eat away at your investment profits. Typically, your online broker might charge annual fees, platform subscription fees and even inactivity fees.