How To Choose An Online Broker

Unless you are already day trading with a trading software system hooked up straight into an exchange, you’re going to need a broker to help you buy and sell stocks. There are an increasing number of broker options to choose from as the growth of the internet has made investing online cheaper, safer and easier than ever before. However, finding the perfect-fit online broker for you may prove to be an onerous task if you don’t know what to look for.

Here are a few questions you must address. Are you looking to buy-and-hold stock? Do you want to day trade? Are you a passive investor, a value investor, or of a short-term/day- trader mentality? If the thought of trading stocks in today’s volatile markets makes you break out in a cold sweat, then you should consider buying bonds or other fixed income, low return investment vehicles that may not necessitate the need for a broker, and a simple meeting with your bank will suffice.

If you’re just starting out and require guidance and assistance while you learn the ins and outs of the market, a full-service broker will better serve your needs. As you become more confident in your investing abilities you should consider a move to a discount broker.

There are different levels of support available to investors through brokerages. If you feel confident in doing your own research and making buy-and-sell decisions independently, then a discount brokerage is the best option.

If you believe yourself to be a trader at heart you’re going to need a broker that offers low trading fees on a large volume of trades.

Investigate the response times of the trading systems the broker offers? For day traders and short term traders a slow website can mean losses when a split-second decision is processed too late. For passive and long-term position holders transaction speed might not be a priority.

Of great importance to all traders is the range of services available for executing trades when you are not at your computer
Does your potential broker offer trading capabilities through touch-tone trading, faxes, or simply directly speaking to a broker. Although you may not rely on these alternatives often, it is worth discovering what alternatives are available to you and how much these will cost you in additional trading fees. Customer service has become automated to a frustrating degree, but this can be especially true with online brokerages. Pressing button after button and getting deeper and deeper into recorded messages can leave you feeling frustrated and helpless. In preparation for this inevitable situation, I suggest you give a potential online broker a test run. Call the help desk, send an email to the help center and check what other options they offer.

If you’re set on going with the cheapest option, carefully check the fine print to see whether or not it is really the cheapest. You might find that the advertised rate only covers basic trades and that there may be additional fees for options, limit orders, stop-loss and Exchange fees.

If it is your intent to diversify your holdings, it then becomes imperative to ensure your broker offers CDs, municipal bonds, and more complex instruments like options and futures.

Once you’ve chosen your online broker you are ready to participate in an exhilarating and hopefully, financially rewarding experience..
Do your research, study your charts and be patient: the world of investing is at your fingertips.