Credit Card Debt Guide

As soon as you have done what is needed to test a trading system, you will find yourself ready to trade. This means you need to select a decent broker. Many markets make it a requirement that all traders perform trades through a broker. This means you have to select from two different types of brokers: the full-service broker and the discount broker.

Finding a good broker means finding one that suits you and your trading style.

The following are a number of questions you should take into consideration when choosing an online or full service broker.

1. What exactly are the real commission rates available?

The commonly advertised rates for traditional brokers may range anywhere from a non-existent fee of $0 to upwards of $40 per trade for online services and up to $100 (or 1-2% of the size of the trade) if you have decided to access a full service system. That is why is it of paramount importance to clearly look at the company’s advertised rate and what it specifically applies to. In the great majority of instances there will be a significantly greater fee for brokerage services due to different trading instruments vs. those using a “real live” broker available and accessible through the phone. Sadly, one of the more common facts people discover is that the commonly advertised commission rate may not be directly applicable to the trades you make.

Also, if you’re dealing with a full-service firm, remember their commission rate is negotiable depending on how much business you are running through your account. Negotiate hard and get the best rate you can. Brokerage is a cost of doing business and as such you should always look to lower your expenses.

2. Are there any other extra fees?

A great many number of companies (this includes online and full-service) charge a number of additional hidden fees which can seriously dump additional significant costs to each and every trade. Some charges one needs to be quite aware of include those dealing with the transfer of funds to and from your account, insurance costs, administration fees, late payment penalties, and various other fees. When you need to see the fees, seek to double check the fine print or email for additional details.

3. Is it possible to trade multiple markets and, if so, what do the commissions run?

As your trading venture progresses you will probably opt to trade in a variety of markets. That is why it is best to stick with a broker that you have developed a decent trading relationship with. That is why it is best to plan for the future and select a broker that can provide you with your needs as your investing grows.

4. Will the brokers pay their clients interest on the remaining balance of non-invested cash in the account?

Some online and full-service brokers pay interest in the range of 3-4%. A nice little bonus!

5. Is a large deposit required to open an account?

It is greatly necessary to be clearly aware of high minimum balances that might be needed to open an account. While some companies have competitive and fair rates, you might need upwards of $50,000 to begin. That can be a great deal of money to invest with a company you have not traded with previously. Generally, full-service firms will need additional capital to launch an account with a discount online service.

6. What is the reliability of the service?

The speed and reliability of online trading must be examined with extreme seriousness. There are tales of clients that have lost thousands of thousands of dollars due to systems faults that led to clients being unable to sign in. Such a scenario would be an unacceptable disaster. As such, it is wise to stick with those trading services which have backup systems in place such as phone trading options.

For an online broker, check that they offer STP (straight through processing). This means that trades are placed in the market as soon as they are made. With some discount brokers trades are place manually, so your trade may not be actioned until sometime after you’ve placed it.

On the flip side, the common full-service broker will commonly opt to enter a trade when the request is delivered via the phone.

7. Do they offer any automatic features?

Examine the common extras the company has to offer and then weigh it against the extras that will complement your trading styles. You should not be interested in automated features that will never be used. Such services will be worthless to you.

One excellent feature is that of automated stop losses. Such a feature will enable a trader to set a specified exit point with an automatically triggered function. Another aspect worth checking out is a contingent order which raises questions regarding whether or not one is allowed to place conditions that need to be met prior to an order being automatically placed? For example, if the share price breaks out from your specified buy point of $12, an automated buy trigger may be enacted.

The automated extras are usually more applicable to online brokers, but it’s worth asking the full-service brokers what they offer as well.

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