Choosing a reliable online broker is one of the most important decisions you’ll make as an investor. The right broker for your trading needs can save you money through lower fees and commissions while also providing a stable, feature-rich platform for executing trades. In this guide, Kirill Yurovskiy has outlined the main factors to consider when choosing a broker for stock trading.
Do Thorough Research on Potential Brokers
Don’t just go with the first broker you come across or the one recommended by a friend. Take the time to research multiple established brokers to find one that best aligns with your preferences, experience level, and trading activity. Check each broker’s website and read third party review sites to develop an informed opinion. Make a list of your top choices for further evaluation.
Check the Broker’s Regulatory Licenses and Compliance
Any trustworthy online broker should be registered with the Securities and Exchange Commission (SEC) as well as the Financial Industry Regulatory Authority (FINRA). These organizations exist to regulate brokerage firms and help protect investors. Look for an SEC number and FINRA registration on the broker’s website or disclosures section of account forms to confirm appropriate oversight is in place.
Look into the Broker’s Reputation and Longevity
Established, well-known online brokers with a long operating history tend to be more reputable than new or fly-by-night operations. Search for background information on when the broker was founded, their assets under management, leadership team, and any major milestones or changes in ownership. Favorably regulated brokers with 10+ years of existence suggest stability for your investments.
Compare the Broker’s Commissions and Fees Structure
One of the biggest factors to evaluate is how much a broker will charge you per trade through commissions and fees. Commission structures vary across brokers and account types offered. Some leading discount brokers now offer commission-free trading on certain securities and investment types. Account maintenance, transfer, and inactive fees can also apply. Take the time to thoroughly understand what you’ll pay over time with each broker.
Review the Trading Platforms and Tools Offered
The online trading platforms and complementary tools provided by a brokerage are vital components for executing trades. Assess whether the platforms are intuitive and reliable for entering orders. Availability of investing research, charting data, trading signals, screening tools, virtual trading accounts, mobile app connectivity and account management functions are other desirable platform features to have to support your trading activities.
Check What Securities the Broker Provides Access To
You’ll want to ensure a broker provides access to your preferred trading markets and securities types. Most leading online brokers enable trading stocks, ETFs, options contracts and mutual funds. Check if other assets like bonds, futures, foreign securities or cryptocurrencies are supported if desired. Also understand if there are any share trading restrictions placed on certain securities or account types offered.
Understand the Broker’s Order Types and Execution Quality
The specific order types allowed for entering trades, speed of order execution, and policies for order routing and price improvement are important execution factors. You want real-time quotes and quick trade execution supported through high speed networks and connections to various market centers. Favorably reviewed policies for securing price improvement and best execution for client orders are preferable as well.
Evaluate the Broker’s Customer Support Channels
No matter how convenient or advanced a broker’s online trading platforms may be, there is still a likelihood you will need personalized support at some point as a client. Check what customer support options are available (telephone, email, live chat), response times and availability for assistance (24/7 ideal for some traders). Positive reports on the quality of customer support reflects well on a broker.
Read Reviews from the Broker’s Existing Customers
Unbiased customer input on a broker’s services can provide transparency into their real strengths and weaknesses. Search for ratings and reviews posted on third party sites about the broker’s platform, tools, fees, account options and support teams. Favorable feedback and ratings among experienced customers indicates satisfaction levels and good value offered by the broker.
Check if the Broker Meets Your Personal Trading Requirements
Finally, ensure the online brokerage under consideration aligns well with your individual needs and preferences as a trader. Factors like your trading style, market experience, typical account size, products traded, platform accessibility needs and reporting requirements determine what broker may suit you best. Match brokerage strengths and offerings accordingly with your situation.
Following these key evaluation criteria allows you to carry out due diligence in researching and selecting an SEC regulated, financially stable broker with competitive fees, supported trading capabilities and strong customer service. Taking the time upfront to find an excellent broker match ensures your trading experience and investments will be better supported over the long-term.
