How To Decide Between Brokers And Trading Software Options: A Primer
When you start out in the trading world for the first time, the prospect of choosing how to actually go about placing your first trade is a daunting one. It’s likely that you’ll have a lot of questions to answer – not least when it comes to issues of safety and security. One key question that many new traders ask themselves is this: how do you pick the right software or broker platform? What criteria should be used to ensure that you don’t end up losing money, scammed – or worse? This article will begin to investigate this key question and look towards some practical answers that you can put into action.
Before looking at some of the main criteria for making the big decision, it’s worth thinking carefully about what the words involved here mean. The word “broker” doesn’t necessarily mean what you think it does. Once, it meant a physical person – like a stockbroker – who was there to help you out when it came to buying stocks and shares and advising on what to pick up.
Now, however, that’s changed altogether. The term “broker” is now far more likely to refer to a company which offers you a trading system and access to the market. To a certain extent, “broker” is interchangeable with “trading software” to the degree that brokers tend to offer trading software packages – although brokers tend to be firms with relevant licenses and systems in place to help you get your trading career started.
Security and safety
It’s not quite the most glamorous part of the trading experience, but thinking about security and safety is a must when it comes to narrowing down the list of brokers and trading software to one that meets your needs. Unfortunately, not every broker is scrupulous: sometimes, brokers which look like they are reputable are, in fact, fronts for scams.
It’s not possible to entirely remove the risk of being scammed. But it certainly is possible to take some steps to reduce the risk of problems arising. The main way to do this is to check whether or not the broker you plan to use is regulated by a relevant body. Usually, this will be displayed in a prominent place on the broker’s site, but you can also find out the country in which it is based and then do a search on the regulator’s database.
It’s also worth looking out for other signs of prudence, such as the broker placing money deposited by clients into a segregated account. The more such things you check out, the more chance you’re likely to have of weeding out any bad apples before you put down money. And reading this eToro broker review or similar from a top broker review site can also help you get the knowledge you need.
Brokers make money in different ways, and it’s important to get a good match between your preferred trading style and what they offer. Many brokers charge fees on the spread, which is the gap between the buy price and the sell price: usually a certain proportion will be charged, and this can vary between instruments and brokers. It’s wise to do research in this regard – otherwise you may end up paying over the odds.
However, others charge commissions per trade. If the gap between the buy and sell price is high and you’re trading an instrument often, it may be worth investigating whether a competitive commission-based approach would be cheaper. Not all brokers offer all methods, though, so you might have to sign up to multiple services to find the right approach. If you’re new to trading, it might also be worth only considering brokers that offer trading software packages with demo accounts. That way you can find the pricing model that suits you best before you actually make any risk-based transactions involving actual cash.
In a nutshell, there are many different things to consider before plunging into a relationship with a broker or trading software provider. First off, you need to get your definitions straight and ensure you’re not expecting the sort of individual stock brokerage service which, in this day and age, is largely unrealizable without paying for specialist one on one advice. Brokers in the modern age ought to be shortlisted based on a number of factors, like security and trading terms. Ultimately, making the decision will come down to you and what you’re comfortable with – so don’t rush into it, and make sure it’s backed up by your research.