How to Choose Your First Broker

To begin your first foray into investing means finding the right brokerage account. While this first step is essential for any would-be trader, it is easy to overlook the importance of this elemental step. The truth is that choosing the right broker should always take time. The choice should be made on the basis of considerable fact-finding and comparison.

The Role of a Broker

In order to choose the right broker, one must first be aware of what they do. Typically, there are two types of brokers with two different roles. A regular broker will work directly with their clients while a broker-reseller will effectively be an intermediary between a client and a larger broker. Choosing the best day trading platform should require some knowledge of both.

Regular brokers are more often than not members of authorities and associations. When using the services of broker-resellers, it is always advisable to look into their background and gauge their reputation prior to working with them. The onus is on the investor to do this work.

Brokerage Fees & Other Costs

It is important to understand just how far your budget will get you when choosing the right day trading platform and broker, as the aim is to trade as cheaply as possible. The amount of money you have to invest will likely determine the broker and platform you work with. In this case, it is always a good idea to choose wisely and to compare both day trading platforms and brokers to see what is best for you and your circumstances.

There will be costs and fees to pay (other than trade executions fees), which may or may not eat into a sizeable chunk of your budget and/or winnings. What you can expect to pay in fees and costs will differ slightly from broker to broker, but typically, the majority of costs you will pay are as follows:

Minimums – This is the minimum balance required to open a brokerage account. There is no set price across the board. Many online brokers do have a fair limit, however.

Margin – Many green investors will look pat margin accounts until they have attained a reasonable level of proficiency. For those who choose to dive straight in, it is important to understand the fees your broker will charge when trading on a margin.

Administration and Withdrawal –

Brokers can charge administration fees. This is not unusual at all to find with many brokerage accounts. However, when it comes to withdrawal fees, these can a tad more complicated.

When you attempt to withdraw your money – and find that you can’t – it can be frustrating to be met with a fee or series of fees you did not expect. To avoid such surprises, read the terms and conditions pertaining to fees before you sign up.

What is Your Trading Strategy?

Figure out what type of trader you are – or you see yourself as – in order to gauge what type of broker is best for you. When choosing the right trading platform, you want to have at least enough knowledge to identify the strengths of one outfit against the other. These benefits should always be congruent to your strategy and be the best choice on this basis.



About the Author

Ankur Shah
Ankur Shah is the founder of the Value Investing India Report, a leading independent, value oriented journal of the Indian financial markets. Ankur has more than eight years of equity research experience covering emerging markets, with a focus on India and South East Asia. He has worked as both a buy-side investment analyst for a global long/short equity hedge fund and a sell-side analyst for an emerging markets investment bank. Ankur is a graduate of Harvard Business School. You can learn more about his latest views on global markets at the Value Investing India Report. -- He can be emailed at AnkurShah47@gmail.com