Online trading has made the whole idea of investing a more approachable one, now available to the ordinary Joe. Anyone with some extra money can now invest it in the market, having the chance of multiplying their profits and expanding their financial horizons.
Investing money today can produce benefits in the future, literally putting your money to work for you without having to dedicate 8 hours of your day to it. The attraction is obvious, and brokers have understood how much the average person wants to increase their profits, so they have started designing tools and features targeting beginner traders. And they have achieved a great level of success.
Most of those giving their first steps in the trading world opt for trading in stocks. It’s a popular choice, easier to learn, with lots of facilities and tools from brokers, and also it’s possible to get started with small capital. It’s usually a good starting point from where, once traders have earned experience and an understanding of how the market works, they usually move to other assets or riskier settings.
Traders, especially beginners, should not forget that with every position in the market, there is the equivalent risk that comes from investing money and having the chance to increase your earnings. Risk can be kept manageable or under control, and that is something to keep in mind when deciding to get involved in trading as mentioned by the Italian crypto experts at Finaria.
Define what type of investor are you
The first question all traders must ask themselves is what type of investors they are. This will determine what broker is best suited to help them get to achieve their financial goals. Brokers offer different features and tools that best fit diverse traders, so in order to make the right choice traders must know in what direction they want to go.
Some traders may be more active, while others prefer to play the long-term game. What assets are you interested in trading? Are you looking into social trading? What’s your level of expertise? Are you a beginner in need of high-quality educational materials? Or maybe a more experienced trader who can use advanced research materials?
All of these considerations will help traders choose the right broker for them, one that can provide tools that eventually will lead to better trades and higher rates of success.
How does the stock market work?
The stock market follows a very simple premise. It’s a place where buyers and sellers can negotiate prices and trade shares.
The market is a network of exchanges. First of all, companies must list their shares in the stock market, for those to be available to be bought or sold. When traders buy those shares, the companies can grow their business and it’s considered the whole value of the company is reflected on those shares. Once the shares are in the stock market, they are rules by the laws of supply and demand.
For traders to make a profit from buying and selling stocks, the price of selling must be higher than the original price they bought those shares at. This difference, minus eventual commissions, is the profit they can make.
Finding an online broker
As we have mentioned, choosing the right broker is the most important decision traders have to make.
There are basically two types of brokers, discount ones and full-service ones. The latest ones offer a huge range of what we normally call traditional brokerage services. This includes financial advice, research tools, and advantageous fees. However, these accounts are dedicated to larger investors with minimum accounts that usually start at 25.000 dollars, meaning professionals and retailers are the targets of these brokers.
Discount brokers usually offer attractive commissions and fees while lacking in different areas, like customer services, research and educational tools available, and diversity of services. Initial deposits are usually and features and services are mostly dedicated to small trades.
Discount brokers have become very popular in recent years thanks to the many advantages and reach the online world has. As things have evolved, discount brokers have managed to earn a respectful place among other bigger and more traditional brokers.
Keeping in mind what type of broker you’d prefer, will help make a more informed decision.
What to keep in mind when choosing a broker?
There is a wide array of aspects to keep in mind when choosing a broker. Some may be a priority for some brokers, while others may not be as important. However, certain aspects cannot be ignored, for example making sure the broker you’re choosing is regulated by the appropriate entities. This will guarantee the traders’ information and their money is safe.
This is the first consideration all traders should always check out before committing to any broker.
There are several regulatory bodies of different categories making brokers more or less secure. The categories are tier-1, tier-2, and tier-3. Having one or several tier-1 regulators makes a broker more secure and trustworthy.
Some countries have stricter regulations while others are more flexible. This is for example the case of the US, where Forex regulations are so strict that even some of the biggest international brokers cannot offer their trading services to US residents.
Traders should keep in mind that where there is the potential of making money, there are also scams and fraudulent operations traders risk falling into.
Minimum to open accounts
Brokers require a minimum initial deposit to open an account with them. In some cases, it may as low as 500 dollars, or even less, but for professional accounts, the amounts are way higher than that.
Checking out reviews of brokers before committing to one, will give traders an idea of what the brokers request to open accounts, as well as having a better idea of how reliable the broker is and what their strengths are.
Discount brokers have a good reputation for having low fees and commissions, therefore higher chances to make a profit. However, many times this is a façade that proves not true in the long term.
For many traders, this is the most important aspect and while attractive, this should not be the sole aspect to keep in mind.
In general, brokers take a commission on every trader you do, the amount varies with each broker. At the same time, some brokers offer zero commissions, however, in these cases, there may be hidden fees too.
While choosing a broker, traders should consider how actively they will trade in order to make sure they don’t have to face inactivity fees or higher commissions for trading more. Considering fees and commissions is a must especially for small traders that start with small amounts of money to invest.
Traders should remember that commission applies to selling and buying assets in the market, regardless traders make or not a profit on these assets.
One of the main aspects that traders should consider when choosing a broker is their offer in terms of online trading platforms and mobile apps.
Some brokers offer their own flagship platform, and some are incredibly reliable, fast, and full of details and research features. Others opt for the widespread and very popular MetaTrader options, with MT4 still leading the way, and some new tools with the MT5.
When thinking about the online trading platform, there is an interesting aspect that can really help traders not only choose a broker but also give newer traders an insight into the ways the market works.
Brokers usually offer a demo account that can be used to test out their platform, but also to experiment in the market investing with fake money, trying out trading strategies, and learning to identify signs of entries and exits of profitable deals.
A broker offering a demo account shows they are reliable and serious, and traders should definitely take advantage of this opportunity to check out the broker and speed up their learning curve in the market.
Research and educational tools
Most brokers offer a variety of research and educational tools accessible from their website or platform. Even discount brokers, while their materials may not be up to the highest standards, it has become quite normal to offer some basic advice, at least technical on how to use the platform or take advantage of the available tools.
Bigger brokers offer huge libraries with articles, videos, and even webinars on technical data, and also more market-related education. In some cases, the resources are organized by level of expertise or maybe by asset, and this point has become one of pride for certain brokers.
If you’re a beginner, you may very well benefit from articles, tutorials, and interactive materials that can help you on the learning curve that’s necessary to become successful in the trading world.
But even advanced traders will want to have research tools available that help them to make better deals and take advantage of certain services, like leverage in the case of Forex. Traders can usually customize their platforms including charts and indices. When choosing a broker do not sacrifice these tools for lower costs, they may make a difference in the future.
The last aspect to consider when choosing a broker is their customer service. Making sure your broker offers an array of options to contact them and flexible hours will definitely help in case you have a technical difficulty. Some of the biggest brokers also offer trading advice, though this is rare.
Discount brokers usually have very restricted and sometimes unreliable customer service. In order to make sure that the broker services are up to your standards, you should check out reviews and opinions from other users. Remember that while hopefully, you won’t need it, if you do you would probably want a fast answer with efficient solutions.
How to invest the money as a beginner: a conclusion
Trading has proven to be one of the best ways for small investors or beginner traders to start multiplying their earnings and making profits. It has definitely never been this easy to invest your money, but success will be achieved only if you consider a few aspects of the trading activity and make wise decisions.
Probably the most important decision is choosing the right broker for you and our trading style. Committing to a safe and reliable broker guarantees that they offer the tools that you need to achieve financial success.
Finally, traders should be aware of the risk that comes from trading, while often can be kept under control, it’s an innate part of the trading activity, and the best way to manage it is learning about what are you trading and how the market reacts, as well as keeping informed in order to make wiser decisions that lead to better deals.