Once you decide to start trading, the next big step that you must make is choosing a reliable trading broker.
Making this important decision isn’t as easy as it sounds, especially if you lack the experience and knowledge to differentiate between a bad and a good broker.
A broker, who acts as an intermediary, is critical throughout the trading process. A good broker will boost your investment opportunities, while a lousy broker will only limit your trading options and increase costs.
The criteria you can use in picking a reliable trader is simple. Below are five things you should consider before settling for a specific broker.
- Pick a licensed broker
Don’t make the mistake of choosing an unregulated trading broker. There are numerous FCA regulated brokers in the United Kingdom you can choose from. Do your homework and carry out a background check on every potential broker you come across.
Working with a regulated broker is an assurance that they meet all the operating standards set by the FCA. Some of these standards include maintaining separate accounts and having enough capitalization to be in a position to protect your money.
The regulation also guarantees money safety in case the broker company become insolvent. You can be confident that the broker will maintain high standards throughout as expected of every financial service provider.
An attractive and well-built website doesn’t guarantee that a trading broker is approved by the FCA. be cautious and don’t assume even the most minor details as you shop around.
- Consider what you want from the broker.
Brokers fall into different categories depending on the service they offer. Discount or execution-only brokers trade as per the instructions you give via phone or online.
Full service or advisory brokers act after discussing your portfolio and trading ideas with you. They will offer investment advice to help you make an informed decision.
Additionally, some full-service trading brokers provide discretionary services for investors with large portfolios. They will manage your money on your behalf.
Since advisory brokers offer extra insights and support, their services cost more. You can get the best from an advisory broker if you hire one you can trust and create a good business relationship.
- Know how the trading broker operates
Trading brokers work with different markets in different methods, mainly when dealing with international stocks. Some send your order directly to the market or provide direct market access.
In some cases, brokers trade via a market marker, a firm that buys and sells stocks anytime and updates prices regularly. Other brokers trade via a different local broker who works with a market maker. The market maker could be in your country or a foreign country.
If you are a regular investor, you might not be concerned about the trading process. However, numerous intermediaries translate to high costs. In this case, if you intend to trade frequently at the best price, you might want to understand how your broker operates. Pick one who uses fewer links when trading.
- Trading software and platform
You will use the broker’s trading platform and software to access the market. Therefore, you must ensure that the platform is reliable and has all the fundamental analysis and technical tools needed to make informed trading decisions and transact with ease.
Some brokers will let you choose the platform you wish to use from their selection. Trading solutions providers offer different platforms.
Other brokers have taken the initiative to create their trading platforms to stand out among other brokers in the market. These proprietary platforms are more reliable since they are specially designed to function as per the client’s needs.
Nevertheless, choose a trading broker who is willing to offer a range of trading platforms and software. Pick a platform that comes with the best features such as;
- A variety of technical indicators
- One-click trading
- An efficient charting package
- Trailing stops and stop-loss order among other risk management tools
When deciding on the platform to work with, begin by ruling out one that doesn’t trade the securities you plan to invest in. Also, ensure that the platform gives quotes in real-time. Additionally, it wouldn’t harm to choose a platform that allows you to customize watch lists and alerts.
- Understand their Brokerage fees
Although fees might not be your most significant worry compared to other factors, ensure that you know the exact amount of money you will be charged for the brokerage.
You may be willing to pay more if your broker offers better or extra services than other brokers. However, ensure that you don’t lose too much of your investment returns to trading commissions and accounting fees.
Bottom line
Ensure that the trading broker you pick serves your needs. Don’t go for a firm that seems good on paper; some have poor customer services and slow trading platforms, which may lead to losses.
You can work with several firms and own several accounts. Different brokers are good in different niches. Make a smart move!
