No matter if you’re just starting out on the market or you have been present for quite a while, picking the perfect broker for you can be a journey. A challenging one, for sure, but aren’t the best things like that?
So, before starting the long-lasting adventure of discovering your trading match, you should get to know yourself first. Do you know what type of a trader you are? Do you like to engage with the excitement of the Forex market, or are you rather keen on safe-haven assets like gold and platinum? Or maybe, you’re a solid type of a client that likes to trade stocks until you drop. Either way, you can learn a lot about yourself and find the most suitable broker this way.
Which Type of a Broker Suits You?
There are several key features that distinguish different types of brokers on the market today. You can find several distinctions online, but we will cover them all in the following passages, so you can deep dive further into each one.
Regular Brokers and Broker-resellers
As the name would suggest, a regular broker engages directly with the client. Generally, it is a safer and most common option for the majority of the clients, though some may disagree. How can you recognize a good and trustworthy regular broker? Well, that’s easy. They are usually a part of a highly reputable organization, such as the Financial Industry Regulatory Authority (FINRA) or the Securities Investor Protection Corporation (SIPC).
On the other hand, you also have an option of trading with the broker-reseller. Here, there is a lot more research to get into, but that doesn’t necessarily have to be a bad thing. The broker-resellers are actually the middle men of trading - they connect a client to a larger broker that can guide them on their trading journey. Namely, the broker-resellers are operating based on the “buy low, sell high” principle. But wait, isn’t everybody doing the same thing? Well, things work a bit differently with this type of broker, this strategy is quite challenging to implement, but the rewards are quite high and satisfying.
Full-Service and Discount Brokers
Furthermore, you can find another quite interesting and popular distinction among the brokerages. Full-service brokers are typically suitable for the new and aspiring investors, who can learn quite a lot from an experienced broker, in case they are willing to pay a bit more for the experience. With this type of brokerage, you will have a more in-depth approach to your trading journey, as well as personal recommendations and advice that is suitable for you as an individual trader.
On the other hand, the discount brokers are here to guide you a lot less, allowing you to rely on your own experience and make your own decisions. Still, these brokerages offer a variety of different trading tools, which you can use to gain confidence and assurance while you navigate the market.
What About the Costs?
Especially when you’re first trying out on the market, you need to keep in mind the different costs that may find you along the way. Although it is wise to create a budget in the beginning and stick to it, things could get quite exciting once the wheel starts spinning.
So, these are some of the most common costs and fees you should look out for when you’re searching for the perfect broker:
- minimum costs - these types of costs are important when you’re first setting up your account. Namely, it is common that the online brokerages have the lowest minimum costs, somewhere between $500 and $1.000
- margin account costs - if you wish to open a margin account somewhere along the way, you should keep in mind the costs that can come up with that decision. In all honesty, there are some different features that you should look out for with the margin accounts, including the higher minimum balance requirements, as well as different interest rates that each broker requires
- withdrawal fees - when it comes to withdrawals, different brokers have vastly different policies. For example, some brokers will not allow you to withdraw your money if that process would bring your funds to bellow the required minimum, which is not unusual. On the other hand, there are always different withdrawal fees you should keep in mind.
Which Type of Trader are You?
Speaking of different types of advantages and people you can encounter on the market, one should always look within itself first before making a big decision. So, look deep down and try to answer these questions:
- what are my strengths and weaknesses?
- how can I benefit from the advantages of the market?
- am I patient and easy-going, or aggressive and hasty?
Aside from your personal idea of what trading should look like, you should also assess the current possibilities that the market has to offer. Luckily, today you have many different options to choose from, which is why it is so important to get to know yourself and your needs.
What is Your Knowledge Level?
The majority of brokers today offer many different educational tools suitable for different levels of trading proficiency. Before you begin, you should definitely check out this section of the broker’s website, just to see if the particular way of learning is a good fit for you.
But still, there is no need to stress or do a lot of research. Most of the trading platforms offer different types of education, from video tutorials and e-books to more advanced market data and analysis. Either way, it is quite smart to make the most out of these tools.
How Invested Are You?
This is quite an important feature you should keep in mind. The main question is - how much of your time and efforts are you planning to put into your trading journey. Namely, whether you are planning to allow trading to take over your free time or you’d like to revisit it once in a while, this will significantly influence your choice in a broker.
What are Your Trading Goals?
Speaking of efforts and dedication, you should always keep your head in the game and follow through with the plan you initially had when you first started trading. And sure, these plans and goals can change, but keeping your main goal in mind can significantly help you and make your life easier in the long run.
Security and Protection of the Funds
This is quite an important feature that you should definitely seek when you’re choosing the best broker. Namely, putting your money into a brokerage is quite similar to putting your money in a bank. If, for example, that bank went bankrupt, your funds are still yours, and they should be paid out to you no matter what.
Similarly, many brokerages today offer their clients an additional form of fund protection . One of the examples that work pretty well on the market today is keeping your money in segregated accounts. So, whatever happens within the market landscape, your funds are completely secured and at your disposal.