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How To Assess Online Trading Brokers

The sheer number of online trading brokers, with all their colorful sites and flashing logos, probably adds to the pressures facing newcomers to financial trading, rather than making life easier. Such is the competition that many of them seek to entice you with special offers such a lower fees. But don’t allow yourself to be hurried into selecting a broker. Consider your strategy first.

What part of the market do you want to concentrate on first? Do you want to trade in shares, or in futures and options? In commodities from a regular account, or speculate in forex from a spread betting account?

For example you may be of the view that company shares in the energy sector are set to increase in value over the next year and more. In that case you will want to invest in several selected energy-related companies. Will you simply purchase the shares or go for futures and options?

The latter means purchasing the right to purchase a quantity of shares at a fixed future date at a fixed price based on their price now. If your trade was successful then you would in effect be buying the shares at maturity of the option at a discount. You could then either sell them and pocked the profit, or keep them if you think they are going to carry on increasing in value.

If you are more interested in the foreign exchange market then you should study currencies and form an opinion on which currency pairings offer the best prospects for profit and what price movements in the medium to long term are likely.

The important thing is to learn as much as you can about all the various financial instruments you can use to profit from and the different kinds of brokerage packages available and how they relate to each other. And to do this before considering which broker to use.

Brokers invariably classify themselves under a number of headings, though in reality often one broker will cover all these classifications. For example, there is a stock trading broker, a forex trading broker, an options trading broker and a futures trading broker. All these are fairly self explanatory, and all services are normally online. But just because you are currently interested in one of these types of broker, e.g. a forex broker, it’s best not to make your selection of broker on that criteria alone.

In any event forex brokers are often specialists in foreign exchange and do not touch any other kind of market. As a beginner it’s best if you avoid these and select a well-known broker that covers all kinds of markets, including forex. This gives you flexibility in your trading without having to open another account with a different broker (and fund it).

Brokers also classify themselves according to whether they are promoting “discount” services or “full service” services. Again, in reality, most brokers offer both kinds of service. The full service is more expensive as the broker gives advice on proposed trades and may even suggest trades for you to enter, and when to come out. The discount service does not include this advice, but merely lets the trader use the broker’s trading platform and certain other facilities, for example an online forum or charting package.

Most newcomers to financial trading opt for a discount service broker. Not only is this a cheaper option, but it gives flexibility in selecting independent sources of information and advice in making trading decisions. If you’re still unsure, check the forums for opinions of current traders on which online stock brokerage is best. Or check those brokers on the web site of the appropriate regulating authority.

And one final thing. Whatever you do, find someone who will be your mentor, so you’ll know that you just cannot fail. Someone who has made millions himself from trading the financial markets, and who would love to teach you how to copy him. Just go to our home page, fill out the form, and click on Submit. Simple as that.

Philip Gegan