Broker Essentials: Key Takeaways
- You NEED a broker to execute trades. Here’s how to find a good one.
- The seedy side of commission-free brokers…
- Do NOT choose a broker before you read this!
Here’s a little horror story about brokers (don’t worry, it has a happy ending)…
Way back when I was young, there were no online brokerage accounts. You actually had to call a broker on the phone to execute a trade.
Terrible, right? Happily, technology has come a long way and most trading is done online these days. Thanks to online brokers and resources like StocksToTrade, you can get up-to-the-minute stock info and execute trades with just a few clicks.
Your broker is literally the gateway to making trades, so it’s important to choose a good one. Here’s an essential guide to what traders need to know about brokers…
Table of Contents
- 1 What’s a Stock Broker, Anyway?
- 2 What Every Trader Needs to Know About Brokers
- 3 How to Choose a Stock Broker
- 4 Informed Decisions = Smart Decisions
- 5 One Platform. One System. Every Tool
What’s a Stock Broker, Anyway?
When you buy stock shares, you’re actually buying stock certificates that act as proof of ownership.
In old times, you actually got a physical certificate when you bought a stock. Now, those certificates are virtual.
However, you still need someone to facilitate the transfer of those certificates. That’s your broker.
These days, there are a TON of different brokers out there. There are brokerages associated with big banks and purely web-based ones.
But not all brokers are created equal. Here’s what you need to know before you choose one.
What Every Trader Needs to Know About Brokers
First off, you need a broker. You can’t execute trades without one.
But that doesn’t mean that any old broker will do.
Since your broker is responsible for making your trades happen, it’s important to take the time to choose one that really meets your individual needs.
Here’s how to choose the right broker for you…
How to Choose a Stock Broker
Every trader’s needs are different. So rather than suggesting specific brokers, here are some specific questions you should ask yourself to help you find the best one for you:
1. What Kind of Trading Do You Do?
Are you a…
It’s important to think about your trading style before you choose a broker.
For instance, not all brokers support short selling or options trading. If you want to get involved with a specific type of trading, be sure it’s something a potential broker offers.
Another consideration is the type of stocks or securities you want to trade. For example, not all brokers offer access to OTC stocks. So if you’re interested in trading OTCs, be sure to choose a broker that offers access to them.
Note: Interested in learning from a millionaire options trader? Don’t miss this.
2. What Are the Account Requirements?
Before you fall in love with a broker, be sure to check out their account requirements. Just about every broker has certain criteria that need to be met.
For some, that might be an account minimum. Some require little to no money to fund your account, and others require tens of thousands of dollars.
Other brokerage accounts might have geographical requirements. For instance, some accounts might not be available to non-U.S. members.
Be sure to consider how much money you’ll fund your account with and to educate yourself on the various requirements before opening an account.
3. Are There Commissions or Fees?
Even in the age of commission-free trading, there can still be hidden fees associated with your brokerage account. Be sure to do a little research before you open an account.
For instance, some accounts will have a yearly fee. Or some may charge for dipping below a certain balance or if you’re inactive for a period. There may even be a closing fee on some accounts.
Be sure to research any account fees like this from the beginning or you could be surprised by them later. You don’t want to lose money due to unforeseen fees.
A Note on Offshore Brokers
Offshore brokers might seem like a great solution for traders. They’re cheap and they can let you bypass the PDT rule. But beware — they’re often super shady. This post reveals some of the downsides of working with offshore brokers. Beware!
4. Do They Have Stock Analysis Tools?
Some brokers offer stock analysis tools for free. Others offer them for a fee. Others don’t offer them at all.
If you’re a member of StocksToTrade, this may not be as big of a consideration. You already have a thorough platform to perform analysis and you may not need this feature as much from your broker.
Or you can integrate your broker with STT. This lets you navigate the market based on your watchlist, then allows you to take action right from the platform.
STT is compatible with a variety of different brokers — see if your brokers made the cut.
Ready to try STT? Start your trial now!
5. What’s Customer Service Like?
If you have an issue, how many hoops will you have to jump through to talk to someone in customer service?
Be sure to research the customer service BEFORE you open a brokerage account, or you could be very frustrated later.
You might even want to call the customer service department before you open an account to see what the experience is like!
At the very least, ask around. There’s nothing like a real-life review from someone in your trading community.
Informed Decisions = Smart Decisions
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Choosing an online stock broker shouldn’t be taken lightly.
The right broker can help you make the most of every trade and make the best use of your time. Researching brokers might not be the sexiest part of trading. But this behind-the-scenes work can help you become the best trader you can be.
What is the most important thing you look for in a stock broker? Leave a comment below!