When it comes to stock trading, having the right stock broker can be the difference between success and failure. Below, we will take a look at a few things that are good to keep in mind when selecting a stock broker.
Also remember that it is possible to utilize several stock brokers. Instead of compromising with a middle-of-the-road stockbroker, you can sign up with several of them to take advantage of their respective strengths. Maybe one stockbroker offers the lowest costs for day trading small posts, another is best for larger long-term investments, and a third offers trading in certain stock derivatives that you are interested in.
Check costs carefully
- Check what it would cost to do the type of trading YOU are interested in. Low fees on FX trading isn´t a selling point if your plan is to trade stocks. Low costs for penny stock trading isn´t relevant if your strategy is all about long-term blue chip investments. And so on….
- Always check ALL the costs relevant to your trading plan. Some brokers lure traders in with very low commission fees, but will add other charges here and there to compensate themselves. Take a look at the whole picture before you select a broker.
Examples of costs to look for:
- Purchase commission
- Sales commission
- Leverage fee
- Over-night fee/cost
- Deposit fee
- Withdrawal fee
- Currency conversion costs
- Inactivity fee (fee charged if the account is inactive for a prolonged period of time)
- Platform fee
Also check the spreads, since many brokers earn a lot of money by offering not-so-tight spreads.
Chose a broker that offers the instruments you want
This might sound like a no-brainer, but you´d be surprised how many traders that do it the other way around. First the sign up with a broker, then they start trading with whatever instruments and products that broker happen to have available. If you want to trade in Belgian stock companies because that is your strength, make sure to pick a broker that actually offers Belgian shares and/or trading in instruments based on Belgian shares.
Try the platform using free play-money
What or which trading platforms will you get access to with this stock broker? Are they suitable for your needs and preferences?
Reputable trading platforms will typically allow you to try them out for free using play-money. That way, you can test out all the trading features, navigate the platform, explore various tools, and so on, without risking a penny of your own cash. This is time well spent. No matter how great a broker is, you don´t want to get stuck with a trading platform that you don´t like.
A trading platform that is difficult to navigate, one where it is easy to hit the wrong button, one that have a tendency to freeze or lag, are all examples of platforms that aren´t just annoying – they can actually cost you a lot of money.
What kind of reputation does this stock broker have among traders? Every stock broker (and pretty much every business) will get some angry reviews from disgruntled clients, but how does this broker fare compared to others? Does this broker seem to have an unusually large amount of disappointed customers in relation to their size? How does this stock broker fare in even-keeled third-party reviews?
Do you want phone service and/or office service?
The most cost effective way to carry out stock trading is normally to do it on a platform online. However, some people do not like this – they prefer to give orders to their broker over the phone or by visiting the broker´s office. There are still banks and other brokerage companies that offer this, but you can expect to pay more than for platform trading online.
If having access to phone service and/or office service for your trading is important to you, make sure you check if the broker offers this and how. Also, what are the additional costs associated with this? Is there an office near where you live? Can you make a domestic phone call, or will an expensive international call be required?