For many investors nothing is more important than the amount of fees charged when determining which broker to use for their trading activity. While this is particularly important for small retail investors, there is a lot more when it comes to choosing your broker than the amount of fees you are likely to be charged.
To discuss this I will use a bullet point list, which highlights the most important aspects that traders should consider when selecting a broker.
The ultimate broker selection checklist
- Low commissions are great, but personal support is as good: When selecting your broker, make sure that the broker seeks to understand your risk profile, your preferences, as well as your favorite trading instruments. A good broker will be able to give you tips and guidance based on your profile, and of course do not forget to negotiate commissions charged to you.
- Your broker must be a service provider, not a sales person: Basically we all know that brokers want to make money, same as you do, but a good broker should focus on service rather than getting you to buy/sell stocks/currencies so that they can make their commission/spread. As such, the final decision to buy should always be yours, not the broker’s. Therefore make sure the broker you are choosing has a good reputation with regard to this matter.
- How good is your broker? Sometimes not every broker is as good as they say. Therefore, when you are choosing a broker you can ask them to point out some of the stocks that would fit your investment profile and risk tolerance, and why they think those stocks are perfect for you. This could be a good way of gauging how good they are in order to determine whether or not you will be able to rely on their recommendations.
- Research and analysis: Some brokers have their own research and analysis department that is tasked with supplying clients with actionable trading ideas and in-depth analysis on companies. This should be one of the main benefits that investors should expect to receive from their broker.
- Available trading platforms: Since the emergence of mobile devices such as smartphones and tablets, trading has gone mobile and traders have embraced this paradigm shift thereby forcing brokers to come up with alternative trading platforms for mobile devices. Therefore, it is important to find out whether your broker has an iPhone app or Android trading app , among others depending on your device before making your choice.
- Regulation: While this may appear to be an obvious case, actually it is not. This is because, depending on your location/resident, not every broker would be available for you as a trader. For instance, there are several E.U.-based brokers regulated by various local bodies that cannot be used by U.S. clients. Therefore, it is important to make sure that the broker you choose is regulated by your local financial regulatory authority which allows them to transact business in your country.
Selecting the right broker for your trading is one of the most important steps that traders must follow carefully when launching their careers in investing. If you get this wrong, then chances are you would face problems in your trading activity down the road.
What do the experts say?
Ryan Fox, an analyst for binary options brokerage platform OptionsXO, says, “Choosing the right broker is one of the most important aspects of investing. In most cases, it could make all the difference, and thus it is more than just being able to access a trading platform. It is about finding a solution to all your trading needs. It’s about the additional services as well that you get from your broker and these could be very crucial in making you successful.”
These days most brokers offer access to educational resources such as an academy, trading videos, market analysis and webinars. However, some have gone a notch higher to provide one-on-one trading sessions and training along with tools that help traders in making their investment decisions.
Some brokers offer these additional services at a fee, while others make them available depending on the type of account you open with them. Again, this implies the importance of making a thorough evaluation of the broker you intend to use.
Be watchful of scams
The internet has made it very easy for people to start businesses online. Now, while most of the available online brokers are genuine, there are a few that are only out to scam unsuspecting traders. In most cases, they tend to claim that their services are among the best in the industry sometimes promising high payouts/returns.
Some traders have lost money before even making a single trade, while others have had their identities stolen. Therefore it is important to be watchful of such rogue brokers as well, and this can be done by a simple search to confirm whether or not the broker is associated with any scam reports.
Conclusion
The bottom line is that, when traders get to the stage of choosing a brokerage partner, it is important that the broker you choose is able to engage you on a personal level.
This is because every investor/trader is unique and as Fox the analyst with OptionsXO, a binary options broker earmarked, this could determine whether or not you will be a successful trader.
