The choice of a reliable broker is a guarantee of success in the stock market. In some countries, it is possible to conduct legal operations in the stock market solely through broker agencies. It is not easy to make a choice when you are picking from thousands of options.
Who Are Brokers?
Brokers are the stakeholder in the trading of securities on the stock market. They have the right to carry out transactions on behalf of the client. Relations between the broker and the client are regulated by agreements concluded in the presence of legal entities.
Only brokers have the right to purchase a trading place on the stock exchange. Therefore their presence in the stock market is necessary. We suggest that you pay attention to the 10 most important criteria that guide investors when choosing a broker to make trades in the stock market.
10 Criteria to Consider When Choosing a Broker
1. Reliability of the brokerage company
Brokerage organizations are represented by investment companies and banks. It is most reliable to apply for a service to a bank, but you should expect that these services are more costly.
2. Experience in the brokerage industry
Open client accounts can determine the expertise of the company of the broker. The more client accounts the broker agency has, the more reliable the company’s position. On the other hand, a large number of customers may affect the service, which is put on stream. Usually, in this case, everything works very clearly, but this negatively impacts the individual approach.
3. Cost of services
Earnings of the broker is a percentage of the volume of each transaction. Naturally, you need to choose brokerage firms that take a minimum commission for the purchase and sale of securities. Nevertheless, it is worth comparing the cost of services and their quality. Remember that cheap brokerage companies are usually less reliable.
4. Minimum investment size
Usually, the client needs to invest at least $500 for brokers to agree to provide their services. It also indicates the level and experience of the brokerage company.
5. Access to the trading floor
As for trading platforms, most brokers hold trades on the local stock exchanges. While only a few of them can conduct transactions on Forex and other international exchanges.
6. The possibility of margin lending
Marginal lending is the ability to borrow securities for a short time, and then return them. With the help of margin loans, you can earn even in a falling market.
7. Monitoring of completed transactions
With the help of computer programs, access to which is provided by brokers, stock market participants can monitor the processes on the market and engage in more profitable transactions.
8. Training programs for investors
For development in the stock market, you will need to improve your knowledge. Specify whether brokers are provided with a program for training novice investors and whether they are free. In the process of development in the professional sphere, you will need the help of specialist consultants. It is worth to clarify in advance – will you have to pay for these services also.
9. Practice in training accounts
Teaching accounts are needed for preparation. They can practice and try different scenarios of transactions. And only after you understand what makes a profit, and what – is wasting your finances for nothing – you can go to the auctions on real accounts. Transfer the real money to the broker only after sufficient practice.
10. Additional fees
When choosing a broker, you need to clarify whether the commission of the broker and the depositary is included in charge of the broker or this service will have to be paid additionally. Also, on some exchanges, there is a commission for the input and withdrawal of funds in the stock market.
As an investor, you have to admit that it is not that easy to find a quality broker as it might seem. First of all, you need to select a lot of broker agencies, read their reviews and try to anticipate the quality of their services. After all, you will often have to predict various events when trading on the stock market.