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Finding an online stock broker for when you start trading can and most likely should be a longer process than you think at this point. Before you jump right into choosing the broker that you’re going to use though, it’s a good idea to understand the type of brokerages that exist, as well as the different products and services that each has to offer. After reading this guide, you might be interested in some advice on some brokers here at Timothy Sykes Best Online Brokerage Picks.
In this guide, we’re going to take a look at a few different types of brokers, as well as what they have to offer and the kind of trades that they are best at facilitating. In addition to this, we’ll give some general advice in terms of what you should look for when you’re trying to find an online stockbroker.
When choosing the appropriate broker, you should go through a similar process to that of choosing an investment. Being aware of the type of investment that you usually make and those that are most likely to make you a good return are those that are the best to make, obviously. The case is much the same when it comes to choosing an online broker. A good stockbroker for you is one which offers and facilitates the type of trades that you would like to make. It should also offer any additional features that you would like to reasonably see.
What Is A Broker?
A broker is a firm or organization that facilitates the trading of stocks and securities. For the most part, there are two different types of stockbroker. There are those that are known as normal or regular brokers and there are broker resellers.
Types of Broker: Regular vs Reseller
The first and most common type of broker is known as the regular broker. These brokers communicate with their clients directly, without anyone in the middle. They handle their client's stocks and shares and also deal with their purchases and sales on a first-hand basis. Regular brokers tend to be the largest in the business and are often are more easy to trust – they tend to be affiliated with or registered members of trusted financial institutions.
A broker reseller, on the other hand, is one that does its business in the middle of the trader and the more major regular broker. Whilst they are not necessarily to be avoided, it’s advisable to check out broker resellers in perhaps a bit more detail than you might before opening an account with a regular broker, for example.
Types of Broker: Full-Service vs Discount
As you might have guessed from the title, another two distinctions of a stockbroker is that of full-service and discount brokers. Full-service brokers are more similar to traditional stock brokers – they offer advice to their clients based upon their circumstances and preferences, as well as recommending to them the best trades for their own personal situation. Full-service brokers really get to know their clients, they make the trading process as easy as possible for their clients. It won’t come as a surprise, though, that service as thorough and personal as this does come at quite a premium.
Discount brokers, on the other hand, are able to operate more cost-effectively. Not only do they not offer their traders trading recommendations, but they also tend to leave their clients to do much of, if not all of the work themselves. Discount brokers come with their advantages and disadvantages, just as full-service ones do, of course.
Discount brokers are able to offer a trading platform at a significantly lower cost than full-service brokers, purely due to the fact that the service they offer does not require nearly as many man hours on their part. Discount brokers are great for younger or newer traders that are just starting off in the world of trading. They offer an affordable way to get your feet off the ground and a place to learn a lot of what the world of trading has to offer. Not only do discount brokers bring with them the advantage of lower cost, they also force you to learn. Even the most experienced investors will continue to learn and will have no harm done to them by using a discount broker and doing some of the research for themselves once in a while!
How To Choose Your Broker
Firstly, you’ll want to decide whether or not you want to go with a full-service broker or a discount broker. As previously stated, whilst a full-service broker is likely to provide you with some fantastic trading options, you aren’t as likely to learn much more about trading and it will cost you a considerably larger percentage of your profits.
After you’ve narrowed down your search in terms of the type of broker that you’re looking to trade with, you should make sure that you know exactly what you want from that chosen broker.
Choose the broker around your trading style – When choosing your stock broker, don’t let the broker choose you! What’s meant by this? When you’re in the process of finding your next stockbroker, it’s so important that you know exactly t=what you would like to get from a broker before you even start searching for one.
It’s advisable to write a list and choose a broker because it suits and fits in well with your style of trading. For example, if you’re going to be focusing your efforts on the penny stocks market, be sure to choose a broker that allows for this. On the other hand, if you’re planning on being a regular trader, it’s a good idea to find a broker that doesn’t have extremely high commission rates.
There’s no doubt that there is a wide range of points to consider and learn before you jump to a decision on your broker. As many will say from experience, though, take the time to choose your broker well and it will do you favors in return.
