What is Really Important with an Online Broker?

How do we find a secure broker service, and which of their characteristics are important when we want to invest online?

The Pros and Cons of Trading Online

These days, when using an online broker, we can invest in assets in the stock market from anywhere in the world. This easy access allows regular people to benefit from stock market speculations without much of a hassle.

But there are some downsides to this simplicity. The biggest one is the anonymity of the internet:

• Services offered via the internet are not as transparent as services we can use in the analogue world. With a bit of programming knowledge, a person can easily set up a trustworthy-looking web service and scam its users. The risk of cyber criminality is especially high when we are handling our finances online.

The Importance of Picking the Right Online Broker

Choosing a good brokerage service can alleviate these risks while allowing you to fully benefit from the pros of online trading. Good online brokers are not only licensed and secure but focus highly on the user experience.

Additionally, the service scope of brokers can differ. Some only have access to limited markets and assets, while others might not support a specific trading style you want to make use of.

First Steps When Picking an Online Broker

No matter which kind of trading style or assets you want to use, there are two steps that should always start the search for an online broker:

• Licenses: International financial authorities regulate the trading app market. They offer licenses to broker services that stick to their regulations. In exchange, the service can use this license to prove to its users that it is a tested, secure, and high-quality platform.

• User Experience: After making sure the service is licensed and secure, user reviews can help you find the service with the right focus on the user experience. Articles, for example RaceOption Basic Facts, list the pros and cons of a broker and examine whether the service is a scam or a helpful tool. Here, you find the information needed for your next steps in the search.

Differing Service Scopes of Online Brokers

Depending on your experience and goals, it might pay off to use a specific broker. While they all allow us access to the stock market, the specific features and services can differ wildly.

Cost & Limits

Different brokers have different prices and fees. Which broker is the right option for you might be tied to these costs. For example:

• A day-trader, that makes many transactions in the span of 24 hours, would not benefit from a service that has a low monthly fee but high costs for singular transactions. Things like a fee for holding a position overnight are not relevant in this case since no asset is kept longer than a day.

• In turn, somebody who invests in ETFs, which aim at long-time value increases, doesn’t suffer much from high transaction costs, but can benefit from a low monthly cost for running the depot.

Additionally, brokers often set limits, like minimum deposits or maximum withdrawals. If you only want to invest in small increments, it pays off to look for a broker that won’t force you to buy specific trade sizes or will only let you cash out after saving up winnings.

Guidance

Online brokers rarely offer close and personal advice when it comes to choosing investments. However, if you are new to trading, you might need some help.

There can be several levels of guidance among different brokers. Some offer you current news and market statistics to help you inform yourself, others have more detailed resources on trading, market movements, and specific assets.

• Some brokers offer ‘social trading’ functions. When social trading, you can access the investment decisions of other users and select successful portfolios to imitate. Here, you can also find good information in forums and discussions.

• Another helpful tool are demo accounts. With these, you can try out the full-service scope while using fake funds to test the broker.

Selection

Brokers offer access to different markets and assets within these markets. If you are aiming at trading with forex or cryptocurrency, you will benefit from choosing a broker that is specialized in these kinds of assets.

• Depending on your trading methods and goals, you will need to select the right broker with access to your preferred asset types and markets, like international stock markets and markets with suitable opening hours.

• Brokers for binary options trading, for example, are banned in many countries and are therefore not licensed. Here, it is especially important to look for user reviews to make up for the lack of proven security.

Conclusion

Online trading comes with many chances. However, there are also some risks tied to handling finances online. To make sure not to use a scam, it pays off to look for a licensed broker. Afterwards, user reviews help you find a provider with a high-quality service.

Depending on your goals and trading styles, you might need to look for more specialized brokers. Trading beginners benefit from brokers with financial news, data, resources, and features like social trading. Similarly, specific asset types, like international stocks, might only be available on some broker services. Lastly, the cost of the service is an important decision factor.

(CN-77)