Choosing a Broker
So you have finally made the commitment to trade the financial markets. In preparation you have watched countless trading videos, read numerous articles on which markets to trade, and tirelessly researched which strategies you believe will be most successful. You have a plan and you are ready to take the next step. However, in order to actually start trading the markets you need a way to actually trade them, and this is where the Broker comes in.
Trading Halo have reviewed a number of top Brokers. You can read our reviews here
What is a Broker?
The Broker provides you with the facility that enables you to actually make your trades on your chosen markets. They provide a pivotal function in the trading process, they are the ones that hold your investment funds, give you access to the market prices and facilitate your orders to trade, amongst a number of other functions.
Financial Institutions, such as stock exchanges, are huge financial entities that trade billions of dollars a day. They are so large that they are only willing to let other very large institutions transact with them. Individual investors are unlikely to have the level capital or trade volume that would enable them to trade directly. Enter the Broker, who does this job for you by acting on your behalf, as well as many other individual investors, to provide this access.
Which is the Best Broker for me?
Selecting your trading facilitator is the first really big decision any new trader needs to make. Not all Brokers are the same offer very different service levels that cater to different types of people, so there isn’t necessarily one that satisfies the needs of all types of traders. Therefore the best Broker for you is the one that is best suited to your requirements
However, how do you find out what the best are worst features of all the Brokers are? Many can appear very similar on the surface, but dig a little deeper and their offerings and service levels differ quite substantially. This information is not easy to obtain without time consuming research or potentially painful experiences.
Trading Halo are ideally placed to be able to help and assist you through this process. We have carried out the necessary detailed investigations, and our decades of expertise will help guide you through to a better decision.
Why is my choice of Broker so Important?
Simply because it can make the difference between you being a successful trader or not. If, for example, you have a good trading strategy, but you cannot place your entry or exit trades quick enough, then you may miss out on numerous opportunities.
There are many components to a Broker that can affect success, we cover all of these in detail later on. Your first is unlikely to be your last, and many successful traders operate through multiple brokers simultaneously, not only to spread their risk, but also to ensure they have access to the range of features that they require.
What Important Features should I be looking for in a Broker?
There are a number of features to consider, some more important than others. We cover all these features in a separate article, but below are the most important ones to consider initially.
- Product Range
- Trading Costs
- Regulation and Protection
- Trade Execution
- Trading Tools
- Customer Service
See our guide to Day Trading here
It sounds obvious, but if the Broker doesn’t have the products you intend to trade, then you will be missing out on potentially valuable trading opportunities. Identify the markets you want to trade and check the Broker offers them. It you are looking to trade the Forex market, make sure they offer the FX Pairs you want.
Do not fall into the trap of choosing a Broker just because it has every possible market available, on the off chance you may want to trade it one day. In doing this you may compromise on other areas that may be more valuable to your needs, such as trading costs or execution speed.
Quite simply, the cost of trading can have a big impact on your trading performance! Trading costs can be difficult to determine, as it varies with the product you are trading, how frequently you trade, and also how long you hold the trading position for.
There are also a number of different cost areas that traders can be subjected to, some are very visible and some are more stealthy. Spreads and commission are normally easy to find on a Brokers website. Costs such as deposit or withdrawal fees, or overnight position financing, may be considerably harder to determine.
Regulation & Protection
To trade the markets with confidence, you need to be able to trust your chosen Broker. After all they will be responsible for looking after the hard-earned cash that you have deposited with them. You also want to know that the Broker is not going to take advantage of you, say by mis-selling or overcharging you.
This is where trading through a Regulated Broker helps provide you with some protection. The regulator is responsible for monitoring the provider’s activities to help ensure they offer you a fair level of service and some protection for your deposits. Not all Brokers are regulated and not all regulators are equal, so you need to be aware of what levels of protection you have when signing up.
Trade Execution refers to the mechanism that turns the order you give to trade a market, into the actual completed transaction.
There are many important and complicated elements that make up Trade Execution. The short version is you want to have a Broker that offers the best Speed and Price execution when you trade.
Execution speed refers to how quickly your order request is passed through to a counter-party. The faster the order is placed the better chance you have of your order being executed at your intended price.
Execution price refers to actual price your completed order is transacted at. Obviously you want the best price for your order from your Broker. The lower the price you can buy at and the higher the price you can sell at, the more success you will have as a trader. However, keep in mind that losses are also possible due to these price movements.
If you are going to be a successful trader, then your strategy will undoubtedly require the use of Trading tools. Whether you are driven more by fundamentals or technical indicators, having access to the best trading tools will only enhance your performance.
The main tools to compare between Brokers are Charting and Technical Analysis, Stock Screeners, Market News, Fundamental Research, Heat Maps, Market Alerts, Automated Trading.
See our 5 Best MT4 Trading Tools article
Customer Service is a frequently overlooked requirement from a Broker. If you are new to trading then you will inevitably encounter a problem at some point. When this happens, you want to be able to resolve the situation efficiently. With markets moving quickly, a fast resolution could save you from significant losses.
When an issue occurs, nobody wants to be stuck waiting for an email or online chat response, they want to speak to a human being. Not all Brokers offer the same level of service or have resources in place to assist in such circumstances.
- Trading Platform
- Order Types
- User Interface
- Post Trade Analytics
- Charting Features
- Technical Analysis Tools
- Educational Tools
- Deposit Types
- Withdrawal Speed
- Investment/Deposit Protection
Some of our Favourite Brokers
If you are looking for a venue to facilitate your trading needs, we can recommend the following partners. They have all been carefully reviewed and you can see our opinions on each.