Stock trading used to be more popular to rich people who can afford to buy hundreds or even thousands of stocks, but things have changed. Today, even those from the middle class use whatever they can save from their salaries to grab on stocks that are likely to increase in value. In fact, now is an ideal time to do this as the economies in different countries are starting to recover. Another good thing is that stock trading is not as complicated as before. This can be greatly attributed to the emergence of online brokers who will take care of the trading on your behalf for a fee. However, with the great number of these online traders, how do you know if you are entrusting your money to the right person? Here are a few tips that can help you in picking your online broker.
Your first concern, of course, is how much will your online broker deduct for each transaction or trade. Always go for the lowest rate so that whatever you profit from the trade will not just go to your broker. When comparing brokers’ fees, make sure that you are looking at the same pricing scheme. Brokers charge based on how much they trade, so do not compare Broker A’s fee for 500 shares to Broker B’s fee for 1000 shares.
Assess your needs-
If you are new to stock trading, you would want a full-service broker who will handle all your needs efficiently. Going for those with lesser fees may also mean limited service, which will leave you doing some of the tasks yourself. Once you have learned the ins and outs of stock trading, then you can replace your online broker with someone who will just supplement the tasks that you cannot do.
Everything comes with a fee-
Brokers charge not only for the trading, but for other tasks as well, like issuing stock certificates and having them delivered to you. A small commission fee may seem enticing, but you might get surprised to see later on that you will be paying more for the entire transaction. Be clear with the fees before you sign any contract with an online broker.
Know how much you need to invest-
Online brokers require that you deposit a percentage of the full cost of the trade and this may depend on the type of account you open with them. They usually demand that the minimum be deposited in your account so pick one that you can afford.
Availability is a must-
Since you are dealing with an online broker, the stability and speed of their sites should matter to you. Check if their site is available throughout the day, especially when trading is at its peak. You should be able to give your orders at such crucial times.
Learn about margin rates-
Most brokers will allow you to borrow money against the equity in your account in case you want to buy more stocks. This, of course, also has a fee called the margin rate. You need to put this in consideration if borrowing in the future is in your plans. Do remember that the margin rate can only be declared in your income tax returns up to a certain limit.
As with any product you purchase or service you hire, do review the online broker’s background and reputation. If you can, ask for referrals and recommendations from your friends or relatives who can attest to how efficiently their online brokers have handled their transactions.
More than just stocks-
Aside from stocks, you can also trade bonds, certificates and futures. If you want to invest on these too, make sure that the online broker you choose has an experience on these fields as well.
Author bio- This post has been written by Tressy Jones. She loves to write about Online Trading. She is evangelist at optionalpha.com. They provide options trading alerts through their Trading System to their clients. (259)