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Which Online Brokerage Should I Pick?

By on June 11, 2012

Which Online BrokerageI often get the question from friends while sifting through online broker reviews – which online brokerage should I pick, and why?

Choosing the right online discount broker is very important before you foray in the world of trading. This is a very important decision, especially for frequent traders. Because if you don't get it right the first time, your future could be filled with headaches, expensive fees and disappointment.

So how do you choose the right online broker? The answer lies in your priorities and the type of investor you are. With investing opening up to an ever increasing number of people, there is a wide variety of brokers to choose from.

What Type Of Investor Are You?

Before you start your search for that perfect brokerage firm, look within. Identify the kind of trader you are or want to be. Do you want to go into options trading or are you a day trader? Do you want to be a casual trader or a frequent trader? Do you have previous trading experience or are you a complete novice? How averse are you to risk?

These questions are important because firstly they help you to plot your future course of action and secondly, they help to narrow down the list of brokers that you will be considering. Different brokers specialize in different aspects of trading. You need to find out which is the right one is for you.

Gather Information

Refer to surveys such as Barron’s annual ratings, and these reviews of online brokers to find out more about the top brokerages in the market. Analyze the pros and cons of each brokerage by referring to the survey and also by visiting their individual websites.

Information can also be gathered through interacting with the trader community. Ask them for their opinions and experience in using different trading platforms. Match the offerings of all the shortlisted brokers with your trade objectives and budget.

Customer Service and Education

This is an especially important parameter to consider if you are a novice trader. You may need to pick a brokerage firm that would guide you to form better trading strategies. If you are a novice then the trading education provided by the brokerage, and the customer service becomes very important.

Even if you are an experienced trader you do need some education in using the brokers trading platform.

Platform Technology

How difficult will it be to learn to use the trading platform? Does the platform offer all the tools that I will need in order to trade in an efficient manner?

What about the mobile apps and the website of the brokerage? These are some of the questions that you need to ask yourself while choosing the online broker.

Cost

Price should be one of your main considerations. After all you are getting into trading to make some money. Different brokerages have different charge rates. Some are novice friendly rates while others are friendlier to frequent traders.

If on paper, a brokerage seems to be especially cheap, investigate to find out if there are any hidden costs involved, and if so then how much.

Some brokerages charge a huge amount to open up an account but thereafter their rates are low. On the other hand some brokerages charge a nominal fee for opening up an account but their trading fee is higher. Think in terms of the bigger picture.

About Peter Voga

Self-confessed coffee addict. Family man. Rage Against The Machine fan. Lover (and sometimes hater) of the stock market. Founder of BrokerChats. For more, follow me @petervoga or check me out on Facebook or Google+.

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