Reputation is important when considering an online broker. It is arguably the best way to gauge how happy you will be with the broker. Knowing the experiences that other users have had with a said broker will give you an idea of what your own experience may turn out to be.
This article will cover some of the key things to look for to find a reputable online broker. The beautiful thing about the internet is that we have access to a lot of opinions. That gives us the chance to vet any online broker based on the experience of other users before we sign up.
No matter how good an online broker is, it is only as good as it is suitable. Think about what you need the platform to do for you. What are some of the things that you will be trading through this broker? Some traders will have several accounts with different brokers. However, there is no harm in having one account if possible. Find one that is suitable.
Does this broker allow you to trade what you want to trade? You will often find that there are some brokers that do not offer certain types of trades. For instance, a broker may specialise in currencies and not offer options. Furthermore, they may not offer access to certain stock exchanges.
Stock Broker Regulation
Reputable brokers are always well regulated. Who is looking over the shoulder of the online broker? This is a necessary safety net to ensure that brokers adhere to fair practice. In the event that something underhand was to occur, a regulator would usually step in to ensure that you are not taken advantage of.
Most reputable online brokers will offer the option of investment advisory. This is usually in two forms. There is a free tier that gives you access to some information and analysis of different stocks and options. It is a great place to pick up tips of stocks that are on their way up.
Part of investment advisory will include some pre-made or managed portfolios. These allow you to take a more passive approach to investing. You will commit to making monthly deposits into your account. In return, the broker will use this capital to make investments on your behalf.
What is even better is that you usually have the option to choose the types of investments that you want them to make. The most common options are, investing for income, investing for capital growth, and high risk taking.
High risk taking is often the most lucrative of these options. However, true to its name, it also presents the highest risk of losing your capital. Capital growth is a balanced method that sees the broker spreading your money across various sectors and stocks. This is perfect for those with long term investment goals. Investing for income is designed for those that want their money to generate a frequent payout for them. This can be a monthly or quarterly payout.
A good trader’s decisions are always data-driven. As such, you would want to have a broker that provides you with the tools to carry out the necessary research. Speaking of research tools, while a broker may not have their own tools to offer, they might have the option to use their platform to trade using external research tools such as Active Trader Pro, Stock Charts or MetaStock.
Trading commissions and account minimums
The best brokers will usually charge a premium. Their users are those that see the value of spending their money to access the services that are provided by the broker. However, there is a fine line between a good rate of commission and being overcharged.
There are two things that you should look out for. What commissions does the broker charge per trade? If you are making frequent traders, even the low commission rates will soon add up to a substantial amount. Trading commissions will either be charged as a percentage of each transaction or at a fixed rate. In some cases, it will be a combination of the two.
Account minimums can also be a barrier. This is when a broker requires a certain amount to be deposited for an account to become active. If you are going to be trading with one broker, this might not be a problem. For those who are getting started or those that are looking to use several brokers, this may leave you with limited capital to spread between the brokers.
High commission rates are not always a deal breaker. They may just mean that this is not the best broker to use for day trading or for trading while trying to grow your capital. This broker may still be useful for purchasing and holding stocks long term.
Easy Access to funds
So, you have been with a broker for a while and your trading account has made handsome profit. You now want to get some of your trading profits into your bank account. How easy would that be? You may take this for granted, but there is reason to tread with caution. A good broker is one that makes it very easy for you to not only deposit, but to also get your money out when you so desire. A great example would be IQ Option. This trading platform offers seamless deposits and withdrawals. For an in-depth review of IQ Option you can read more at Public Finance International.
You will find that the depositing part may not be as troublesome as the withdrawals. The common thread with bad brokers is a lengthy waiting period between requesting a withdrawal and getting it paid out.
How accessible is the broker’s trading platform. The ideal platform is one that can be accessed on desktop and on mobile. You want to be able to open or close trades on the platform while on the go via a mobile trading app. The trading interface should be good on both screens.
Picking a reputable online trading platform does not have to be complicated. If you follow the simple steps outlined, you will be able to sift through them to find a good online broker that is ideal for your personal needs. This is where the suitability test comes into play. Consider the trading platforms in view of your own needs, and not just in general.
Once you have considered all of these things, a final check can be how long the online broker has been around. It is not usually prudent to trade with the newest brokers around. A more measured approach is to get on well established trading platforms. Their track record gives you a clearer picture of what you can expect.