If you are a new trader or thinking about starting, you will compare online brokers in order to choose which one to open an account with. The good news is that you have a lot of very solid companies to look at with your broker comparison. The bad news is that they can all start to look alike. Each one promotes something good about itself, but that doesn't mean you can't get the same thing from another broker.
The way to cut through the clutter is to understand what a new trader should look for in an online stock broker. While there are many strong choices out there, some are just not geared toward new traders. Some have a huge selection of investment products that you might consider for your retirement funds. But if you want to be an online trader, that is not something that will factor into your decision heavily.
Here is a list of some of the features of online brokers that you CAN consider:
1. Trading Costs - Commissions and Fees
2. Service Quality - Customer Service
3. Trading platform - the online tools for tracking stocks and making trades
4. This category and includes:
- Investment products - mutual funds, bonds, etc.
- Banking services - checking and savings accounts, mortgages, etc.
- Foreign market trading
- Research - Availability of research on various stocks
- Local Branch offices - If yes, are they close enough to you to make a difference
- Mobile phone trading - Can you trade from a smartphone?
- Educational materials - Availability of training materials to help get you started
These are all important features, but many of these are geared toward more experienced traders. So which of these are most important to new traders for their broker comparison?
Trading Costs - This may be the most important for traders who are just starting. That is because a new trader will place small trades initially as they get started. There is a 100% difference between a $5.00 per trade broker and a $10.00 per trade broker. When you are making trades in the hundreds of dollars, that extra cost can make a difference between profit and loss. Especially when you consider that you will be charged two fees, one for buying the stock and one for selling it.
Service Quality - As a new trader, you might have to call on customer service more than an experienced trader. Compare brokers with this in mind to ensure you can get the support you need when you need it.
Educational Materials - This can be very important to a new trader. You could just learn as you trade, but you risk making some costly mistakes. It is best to combine small trades with a dedicated education effort in order to ramp up the learning curve quickly. Does the broker have a library of training materials, especially ones that cover Technical Analysis, which is the bread and butter of online trading?
These are the most important. Many of the other features are geared toward experienced traders or long-term investors. You may be wondering why trading platform is not mentioned. The reason is that if you stick with the established brokers, you will have all the tools you need to track stocks and execute trades from every one of them. Some brokers offer very sophisticated screening tools, but again these are geared more toward experienced traders.
Good luck with your broker comparison. Remember to compare these features side by side in order to choose your online broker.
