When you have decided that you want to plunge into the stock trading, then the first vital step you need to take is zero down on a stock broker. Selecting a broker is not a simple task and requires serious contemplation. A significant amount of your financial gains and profits in the stock trading will depend on your broker. Moreover, right broker saves you from a lot of hassles which you may have to face otherwise.
Here are some essential tips which can help you take the right decision in choosing a broker. But, before heading to the tips, lets first understand that what a broker is and why do you need a broker to start CFD and stock trading.
Why You Need A Stock or CFD Broker?
In order to buy or sell shares/stocks, one needs to be a member of the stock exchange under which they want to carry out the trading of the stocks. It is not feasible for every single person to be a member of the stock exchanges as there are some conditions, which one needs to satisfy.
This is where the stock brokers come into play. These are the members of the stock exchanges and they help the traders buy or sell shares with ease. They charge a specific amount of commission in lieu of their services. A full service broker is much more than a mere facilitator for selling and buying the shares, and this is why one needs to indulge in detailed research before finalizing on which broker they want to go ahead in the field of trading.
What Should You Consider Before Selecting A CFD or Stock Broker?
Compare The Minimum Balance
While the minimum balance should not be the sole criteria for deciding the broker, but it’s a significant aspect which should not be overlooked. Most of the brokers have a specific minimum balance like $500 or $1000. Also, there are some brokers who have a very minimal fee.
When you are shortlisting the brokers, it’s vital to eliminate the ones who have very high or too low minimum balance. The ones who offer very low minimum balance might be using this as a tactic to attract the customers and at the same time, there are many brokers under the reliable category who charge a genuine amount of minimum balance. So, you can dive into stock trading without putting a very high amount as the minimum balance in your trading account.
Withdrawals Are Also A Vital Aspect
Though, it’s your money, but sometimes it might become very difficult to withdraw it because of the conditions applied by your broker. While the brokers don’t intend to block your money, but they have pre-written policies. Sup with any broker, you must ensure that you read all the terms and conditions carefully, especially the ones highlighting the minimum withdrawal amount to avoid any disappointment or issues later.
Ensure There Are No Hidden Fees
Sometimes, some brokers present very lucrative offers which include a small minimum balance and fairly low margin, but, they have many types of hidden fees. So, ultimately you end up paying more to your broker.
This is usually the case with broker-resellers who sometimes use their fee structure as their USP in order to entice the clients. So, make sure that you don’t fall prey to the marketing tactics used by brokers who keep a lot of fees and charges hidden.
Consider The Type Of Investment You Want To Make
Apart from all the aforementioned points, it’s imperative to consider that what type of trader are you. Depending on your trading style, a particular type of broker may suit your interests more than the others. If you are a short term trader, then you need to look for a broker who has low execution fee as you would be trading more often.
With these tips, you can certainly make a better decision in selecting a stock and CFD broker.