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How to Select the Best Online Stock Broker For Your Own Investment Plan

By Reece Mathews


Every time you purchase and sell, your online stock broker collects his commission. Therefore it's in his best interests to keep you active and encourage you to trade as often as practical.

Most markets require all traders to put their trades thru a broker. There are 2 types to choose from : the full service broker and the discount broker. The full service broker provides his clients with information. He will contact you with trading ideas and then, with your agreement, he is going to place the trades. Discount brokers, as the name says, are cheaper because they do not provide this personalized service. They do their business over the Net, and it is you who makes all you trading decisions.

If you have designed your own trading system , there will probably be no need to employ the services of a full service broker. Actually you can even find it distracting to receive all this advice which you don't truly need.

Whichever type of online stock broker you choose, it is important to gather some information about the service they provide before you go ahead.

Firstly, you need to establish what their commission rates are. Rates for brokers vary between $0 to $40 per trade for an online broker and up to $100 for a full-service broker. In many cases, there will be different brokerage for different trading instruments. It is important that you negotiate the amount of commission you are willing to pay.

Next, you need to consider the extra fees which will inevitably be charged. There are very often hidden extra fees. There may be charges for transferring funds in and out of your account, insurance, administration and even late payment penalties. Get clear on what these charges are before you engage a broker.

You want to find out if you can trade multiple markets. You may want to trade different markets down the track, so make sure in advance if your broker can accommodate this, so you don't have to change brokers mid stream. It is also important to find out if the broker you choose will pay interest on un invested cash in your account. This could be in the order of 3-4%, so you want this to be available to you.

Some brokers require you to start with a large deposit. If there is a high minimum balance required to open your account, you need to be made aware of this. An amount of $50,000, say, to be invested with a broker you are unfamiliar with is a very big step to take.

Trustworthiness is a completely key quality for your broker. Speed and reliability of web trading is vital. Ensure that there is a backup way for you to put trades if this is needed. For a web broker, check that they offer STP (straight through processing).

Finally, does the stock market broker you have an interest in offer automated features? Look at the extras that are offered, and see whether they are applicable to the markets you have an interest in trading. You can like automated stop losses, for example. You can then set your exit point and it's mechanically caused.

To find names of a possible online stock broker, check local investment clubs or go to online forums. Your best place to start looking would be by asking other traders you know for their recommendations. Now you can implement your trading plan and start trading!




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