How to Pick the Best Brokerage Firm
Introduction
Whichmarket do you want to trade? Forex, cryptocurrencies, options, or stocks? Do you want to be an active trader or an investor? Well, whichever the market you want to trade in and whatever the strategy you want to use, you will need to use a brokerage firm.
Brokerage Firms.
But how will you pick one that will be right for you? What are those critical factors you should look out for before you finally select one? Here, we do justice to that.
Regulation
Before choosing any brokerage firm, first ensure that it is at least a reputable one. And by reputable, we mean that it is registered with and regulated by one of the top licensing boards around, depending on the instrument you trade.
For example, as a Forex trader, the broker you use must be registered with the Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA). As a stock trader, it should be registered with the Securities and Exchange Commission (SEC).
Finally, you should stay away from offshore brokerage firms.
The Broker Type
Next, based on your needs and goals, compare and contrast the different types of brokers before you pick. Brokers can either be full-service or discount. While full-service brokerages offer comprehensive services and products, discount ones usually have very limited offerings.
However, full-service brokers develop strong relationships with their clients while discount brokers rarely do. Most discount brokers are online, meaning that trading with them tends to be faster. Additionally, using them comes at lower fees.
Whatever the type of broker you choose, it is important you ensure that it offers a state-of-the-art trading platform.
Fee
Mostespecially If you are an active trader, you have to be wary of this. Fees can quickly become a huge burden on you. For example, full-service brokers charge a fee, commission, or both, which, for stock orders, can be as high as $20 per trade. This is much.
Discount brokers are cheaper, though. But no matter the type of broker you use, you still have to watch out for non-trading fees such as withdrawal, deposit, inactivity, and account fees. Finally, avoid brokers that churn.
Deposit and Withdrawal
Still, do not choose yet. How many deposit and withdrawal methods does the broker also offer? Do you already know? How long does it take to deposit and withdraw with each of those methods? Is there any associated fee? How easy is it to do transactions via the broker’s platform?
Moreover, also make sure that the broker’s customer service is easily accessible. If it can be contacted via multiple channels such as email, live chat, hotlines, and social media, that will be great. Such an advantage will be very important to you when you run into a glitch on its trading platform.