Choosing the right stockbroker is imperative if you want to be a successful stock trader. There are many different stock brokers to choose from online, so there is no reason to stick with one that doesn´t suit you.
Also, keep in mind that you might be better off having accounts with more than one stockbroker. You might, for instance, find one that is perfect for your day trading and another that has better conditions for longer-term investing. Instead of trying to compromise, simply open accounts with both of them. You have no duty to be loyal and use one single stockbroker for all your needs.
Below, we will take a look at a few things that are good to keep in mind when selecting a stockbroker.
Which stocks are available?
Don´t sign up with a broker willy-nilly and let their stock assortment dictate what you trade. Instead, make a trading plan first and then find a stockbroker that suits your plan.
Know all the costs
When you compare stock brokers, it is important to compare what it would cost for you to carry out your trading plan with them.
- Check costs that are relevant to your trading plan. This broker might be offering really great terms and conditions for FX trading, but that is not relevant if your plan is to trade stocks.
- Check all the relevant costs, instead of just looking at the commissions. What additional costs will using this broker entail? Look at things such as deposit fees, withdrawal fees, platform fees, currency conversion costs, over-night fees, leverage costs, etc.
How is the customer support?
This step is easy to forget because we don´t care about a company´s customer support until we encounter a problem. To avoid an unpleasant surprise, inform yourself a bit about customer support before you chose a broker and make the first deposit.
- How can I contact the customer support? Phone call, live chat, email? Do I like this method?
- Is it possible to get help in real-time, e.g. if I need to be guided step-by-step through a procedure? If a stock broker only offers email support, you will not get real-time help.
- When is the customer support open? Does the answer to this question differ depending on the method of contact? (E.g. live chat only available during certain hours, phone support not available on weekends, etc.)
- If I need phone support, what will the call cost me? Is it an expensive call to another country? Is there a call-back service? Some stock brokers outsource their customer service to a call center far away and fail to provide a toll-free number for their customers.
Test-run the platform
Serious brokers and platforms will typically allow you to test-drive the trading platform for free using play-money. That way, you can see if you like it before you decide to use it for real-money trading.
Don´t get distracted by things you don´t need
A typical stockbroker business will earn money on each trade. Therefore, they have a strong incentive to encourage frequent trading rather than longer-term investments. They also make money from selling additional services such as leverage or signal subscriptions.