With the strong development of online trading, there are so many brokers to choose from these days. The offer can be overwhelming so in this article, we want to give you some pointers to choose the broker that’s right for you!
In online trading, a broker is a company that provides a trading platform for investors and traders to buy and sell securities in the financial markets. When you sign up with an online trader, you get to enter and participate live in a specific market. Most of them will include comprehensive trading tools and some brokers also provide tutorials and guidance about trading and financial markets in general.
Markets & Investment Style
Choosing a market that you know a lot about and feel comfortable trading in is also very important. Each of them is different and you should know as much as possible about the trading conditions of that particular market in order to anticipate its price action. It not, you will likely make unnecessary mistake, lose money and be discouraged by trading. A typical example would be to get involved in cryptocurrencies and be taken by surprise by its volatility. In any case, picking your markets will influence which broker you choose because some of them will be better suited to a specific market.
Are you a day trader or a long-term investor? Answering this question will definitely help you find out the market that suits your investment style but also the broker that’s right for you. Day traders typically execute dozens of trade everyday and get in and out of the market as quickly as possible. Day trading is a very active investment style and requires a lot of tools and indicators to forecast price action. It is therefore very important for day traders to choose a broker which offers all these elements within the trading platform. If you’re a long-term investor, you will likely not log in to your account everyday long-term investing is a more passive style of investment. For you, it is of course important to understand general trading and financial knowledge but perhaps even more important to be able to rely on a strong customer service when you need to.
Costs and fees can definitely differ from broker to broker and it is crucial for you to know what those are in advance. Typically, brokers charge a fee each time you open a trade called ‘spread’ which is the difference between the bidding price and asking price of a asset. Since this is taken automatically on top of every trade you execute, it adds up to a significant amount over time. Some brokers advertise low spread on their trading platform which can be seen as a good thing. In this case, make sure to also check other more ‘hidden’ fees they might charge. This can include deposit and withdrawal fees of other forms of trading commissions.
Before you make your final choice and start trading on a live exchange, we strongly recommend that you try different brokers and sharpen your trading skills at the same time on a demo account first. Most brokers do offer this option these days and it allows you discover their trading platform, the markets they offer, the tools and indicators you can use within the platform and the pro-activity of the customer support. Besides it is also a way to get experience in a real trading situation without the risks of losing your money.