For new traders, looking for a new broker can be an extremely daunting task because of the numerous options that are currently available in the retail trading industry. This is largely because this form of trading has grown by leaps and bounds in terms of popularity in recent years and so a larger number of companies are looking to provide access to these trading markets. Here we will look at some of the key factors to consider (and research) when looking to open an account with a new broker.
Since trading brokers are no different from any other business, they are looking to charge fees for providing traders access to the investment markets. Generally, these fees come in the form of spread costs or commission charges, depending on which type of instrument is being bought or sold. Spreads can be seen in the difference between the “bid” and “ask” price (the price at which an asset can be bought or sold). This difference is paid directly to the broker as your trade is opened. Commission fees are charged for CFD positions that deal with individual stock shares and are generally viewed in terms of percentages. It is highly important to look for brokers with low transaction costs, as this will help to improve your profit and loss averages.
Margin and Leverage
Margin and Leverage factors give traders the opportunity to invest in large position sizes while depositing only a percentage of the total trade size. All profits and losses are paid directly to the trader as if the entire position size has been deposited by the trader. This allows for much greater profits (as well as losses), and so these factors must be managed carefully. In general, however, traders tend to look for brokers with the most flexible margin requirements, so that positions can be increased or decreased based in your individual trading style.
These days, most brokers offer their traders free educational materials so that informed trades can be made and each investors trading account remains healthy and growing. Without this, the broker will of course lose its customer base (and no longer be able to charge transaction fees).
While some experienced traders dismiss educational tools as something that is only to be used by newbies, this is far from the truth. Some brokers offer impressive educational materials (at no cost) for their traders, while others tend to ignore this vital feature. Always look to trade with a broker that is committed to keeping its traders informed and educated with up to date educational materials.
Charting software is another aspect that separates the winners from the losers when brokers are compared. Many brokers will offer charting software packages that can be tailored to individual trading styles and can be accessed and understood by both new and experienced traders alike. Generally, these tools can be seen in web based programs or in software that can be downloaded to your home computer. Additionally, most brokers have started to offer mobile trading software so that your trades can be monitored from any location. Always look for brokers that offer all of these tools free of charged and updated to reflected the latest developments.
Finally, customer service should never be disregarded, just as it would not be in any other industry. Specifically for new traders, you should always have Live Chat support available 24 hours per day, 7 days a week (or at least during all trading hours). This feature can prove vital when you have questions about your open positions.