When you start trading, it’s important that you choose the right broker. In this article, we will give you a few tips that you can use to select a broker that fits your preferences.
What to look for when choosing a broker:
- Is the broker cheap? Check the fees!
- Is the software user-friendly? This will allow you to get started quickly.
- Is it possible to try everything out free of charge with a demo?
- Can you trade in known stocks and commodities?
Modern or old-fashioned?
The first question that you need to answer is, if you want to trade the modern way or the old-fashioned way. If your goal is to achieve a steady profit without putting in a lot of work and time, the old-fashioned strategy is buying and holding. In this case, you can use a broker like Alex or Lynx.
When you want to trade the modern way, you can trade in CFDs using leverage. With an internet broker, you can actively trade with lower fees and, thanks to leverage, you can profit tremendously. But what do you need to look for when selecting a proper internet broker?
Offers and fees
The two important factors when selecting an internet broker are offers and fees. In respect to the offers, think about the securities that you want to trade. If you want to trade oil and GBP/USD, you don’t want to open an account with a broker who will only allow you to trade in oil.
The other important factor is fees. With modern brokers, the fees are incredibly low. These costs are expressed in the form of the spread: the difference between the buying and selling price. If you buy GBP/USD for 1:2555 and sell for 1:2557, the spread is 0.0002, or 2 pips. When you open a position of 10,000 GBP/USD, you pay 0.0002*10,000= 2 dollars worth of fees. The spread is usually shown in pips. With currency, one pip is usually 1/1,000th of a cent. You can compare the fees of each broker by making an overview of the spreads.
Speed and support
When you place an order, it’s important that it is executed quickly. With most brokers, you don’t have to worry about that because most positions are internally hedged as brokers have enough liquidity to open positions quickly. Along with speed, support is also very important.
With most brokers, there is support by e-mail. With the more expensive brokers, you can also contact them by phone. Because trading in CFDs is becoming more and more popular, you can most certainly get support in your own language.
Possibilities of the brokers
The specific possibilities offered by a broker are very important. Brokers distinguish themselves by offering special functionality. With Plus500, you trade using a very simple software system; a system that you can use even as a beginning trader. With Markets.com you can also use the more advanced MetaTrader, which offers extensive technical analysis tools. With other brokers, such as ZuluTrade, you can trade fully automatically, so you don’t need to make any hard financial decisions yourself.
Selecting a broker
There are a lot of factors to weigh when selecting a broker. Ultimately, it’s important that you select a broker that suits your needs and offers the possibilities that you like to use, with the lowest possible fees. In our ‘Broker’ section you can look at a few different brokers and compare them so you can choose the best broker for your needs.