Investing Brokers 
If you want to start trading online, you will need an account with an online brokerage. With so many to choose from, it can seem like an overwhelming task to find a broker that meets your own needs. This guide can help educate you on what the key things are to look for in a broker to help make it an easier process for you. If you don’t have the time, you can see some options in our broker ratings and use our handy tool to compare brokers.
What is an Online Broker?
An online broker acts as an intermediary between you and the global markets. They provide you with a trading account and an trading platform so that you can buy and sell financial instruments from various asset classes at the click of a button. Brokers will charge you a small commission fee for using their services but without them, it would be very difficult for the average person to gain quick and easy access to such a wide range of markets including forex, stocks, cryptos, indices, commodities, precious metals (gold & silver), energies (gas & oil), ETFs and bonds.
How to Choose an Online Broker?
The online broker that you choose will depend on your individual needs and financial goals. There are brokers which can cater to different types of investor with a range of products and services. If you know exactly what you want from a broker then the process should be relatively easy. However, if you aren’t sure who the best broker for you is, then here are a few things to look out for:
Commission Fees
When you place a trade with a broker you will usually need to pay a commission fee. This can be on the entry, exit and even when holding a position for a sustained period of time. You may want to shop around for a broker with low fees as this could help you to save on trading costs in the long run. This is especially important if you are a day trader that plans on taking multiple positions throughout the day as costs can add up.
Financial Markets
There are online brokers who specialise in individual market such as forex brokers, stock brokers, indices brokers, commodity brokers and crypto brokers. Then you have brokers who offer a wide range of financial markets. If you want to invest in or trade a particular market then you should check to make sure it is available through the broker you are considering opening an account with. Even if you don’t need access to a particular sector at the moment, choosing a broker that offers plenty of trading instruments means that you will have options to diversify your portfolio down the line.
Trading Platforms
You will be buying or selling instruments through an online trading platform provided by your broker. Therefore, you will want to make sure that you feel comfortable using the platform. It should be user-friendly and customisable with enough trading tools for you to do your market analysis. Popular trading platforms include MetaTrader 4 (MT4), MetaTrader 5 (MT5), cTrader, NinjaTrader and TradingView. Then you have brokers who offer proprietary platforms which can be just as good. If you want to invest or trade on your mobile, make sure there is an trading app available and that it is compatible with your device.
Trading Tools
Before placing a trade, you will probably want to analyse charts for trading signals. There are literally thousands of trading tools that you can use for market analysis, from technical indicators to fundamental indicators, price action and sentiment analysis. Some traders use a few indicators, some use a combination and other just trade blindly. Whatever your preferred trading strategy, you will want to make sure that all of your favourite tools are available from the broker in question. Keep an eye out for brokers who have additional tools other than those that come with the trading platform. These tools can give you an extra edge whereas there are plenty of third-party tools and resources that can also be used for making informed decisions.
Funding Methods
Online brokers accept a variety of payment methods for making deposits and withdrawals. This usually includes credit/debit cards and bank wire transfer. However, more and more brokers are accepting other convenient forms of payment such as e-wallets and cryptos. Check to ensure that the broker has a payment option that works well for you. Other things to consider when it comes to account funding are the applicable fees and transfer time.
Minimum Deposit
Each online broker will have its own minimum deposit requirement. This is the initial amount that you will need to fund your account with in order to be able to trade online. Many brokers have a low $1 minimum deposit whilst others can require $1,000 or more. Of course, you should only ever deposit what you can afford to lose due to the risks involved with trading online.
Demo Trading Account
Most brokers will also offer a free demo trading account. Many experts believe that it is imperative for anyone who is considering investing or trading online to start on a “paper trading” account where you can buy and sell instruments risk-free by using virtual funds. This can be a great way to familiarise yourself with the brokers platform whilst trying out various trading strategies and improving your skills and knowledge of the markets.
Account Types
If you have been having success with your demo trading then you may be thinking about switching over to a real trading account. There will probably be a choice of account types to choose from, each with different deposit requirements, fees and features. You may want to check what accounts each broker offers so you can be sure that there is an account suitable for you come the time you are ready to open one.
Spreads
The spread is the difference between the bid and ask price of a trading instrument. It is a fee that you will need to pay your broker for trading certain assets. Thus, you should check to see if the broker spreads are suitable for your trading strategy. This is especially important for those using scalping strategies that are often dependant on tight spreads. Generally speaking, the lower the spreads on a broker, the better.
Slippage
Slippage occurs when the price at which your position is executed into the market is different from the price that you sent the order and wanted to enter at. Factors such as market volatility and available liquidity can have an impact on slippage. The quicker a broker’s execution speeds, the better. Too much slippage can increase costs if you keep getting unfavourable prices that are away from your desired price point.
Education
No matter how experienced you are when it comes to investing and trading online, there is always more to learn. Some brokers have dedicated trading academies with an abundance of trading guides and tutorial videos to help you improve your knowledge of the markets. This goes to show that they care about client best interests and want to make sure that they are making informed decisions. Some brokers will even provide free market analysis which can help to inspire trade ideas and keep you up to date with the latest market movements around the globe. If you are a novice trader, then it may be more important that the broker has plenty of educational resources although you will also find plenty elsewhere online so perhaps not a deal breaker.
Social Trading
Social trading where you copy the trading signals of other traders has become increasingly popular over the years. More people are discovering that you do not necessarily need the time or knowledge to trade or invest yourself when you can copy the trades of other traders. If this is a solution that appeals to you, you might want to choose a broker that offers social trading signals such as eToro and AvaTrade. Just remember that there are no guarantees on how good or bad these signals will perform and past performance is not an indication of future results.
Customer Support
Nothing can be more frustrating than poor customer service. It can be frustrating to wait ages for a response and to not get your questions answered. Therefore, I consider broker customer support to be one of the most important things to consider when choosing an online broker. It is one of the key factors that we use to determine broker ratings in our broker reviews. Check where the broker has offices located as this may impact the response time depending on your location and time zone. If you prefer to speak directly to someone over the phone or on live chat rather than waiting for a response via email, make sure that these support channels are available.
Regulation
There are regulated brokers and unregulated brokers. When a broker is regulated, they must follow rules that have been put in place to protect investors and you may have some help in the event that something was to go wrong. On the other hand, an unregulated broker cannot offer the same protection but lack of regulation may mean that they can offer certain products and services that a regulated broker cannot. Therefore, you can weigh up the advantages and disadvantages of both types of broker and do your own due diligence to decide which works best for you.
How to Open an Online Broker Account?
By now, you should have a clear indication of what to look for in an online broker. If you are ready to start trading online you can open an account with an online brokerage firm by following these simple steps:
- Choose an online broker
- Submit application form
- Receive account details
- Download trading platform
- Start trading!
