Choosing a Stock Broker
With hundreds of online stocks brokers to select from traders may not know which stocks broker to choose. A trader may not know which factors to look for when choosing their broker, this tutorial will explain to traders more about stocks brokers & what factors traders should consider before deciding which stocks broker to open an account with.
In stocks there is no central market where trades are settled, instead trades are carried out in an Over The Counter market. Because there is no central stocks market place trades will be settled in the online interbank market. This online interbank market is composed of a network of big banks. For traders to gain access to this stocks market they must trade through a stocks broker. The stocks broker will place trades in the interbank markets on behalf of the traders.
Traders cannot trade directly on the interbank market because they do not have the capital to setup the technology for doing this neither do they have the required minimum capital that is required by the big banks to allow them to trade directly in the stock market. For this reason retail stocks brokers exist so as to connect retail investors to the online interbank market. Retail brokers will allow traders who don't have a lot of capital to trade in the stocks market.
Stock trading brokers also provide stocks leverage so as to help traders to open trades with borrowed funds. Because stocks lots are traded in units and most retail investors cannot afford this, the brokers provide this stocks leverage so that traders with little capital to invest can also be able to trade the stocks market on borrowed fund. The borrowed funds are borrowed from the broker, a broker providing stocks leverage of 100:1 means that traders can borrow up to 100 times their capital, therefore a trader with only $1,000 can borrow up to 100 times which means $1,000 multiplied by 100 is $100,000, this $100,000 will be the capital that is available to the trader after using stocks leverage and therefore the retail trader who only has $1,000 capital can now trade standard lots.
Factors To Consider When Choosing Your Stocks Broker
The following factors should be used to determine which stocks broker you will select to trade with.
Regulation - The first thing to consider is stocks broker regulation license. You should only open an account with a broker that is regulated. In stocks the most reliable and most transparent brokers are the ones that are regulated. This is why this is the first thing that most traders will look for before they even start considering whether to open an account with a particular stocks broker or not.
Withdraw Policy - Try to find out the withdraw policy of a broker before opening an account with them. The best withdraw policy is one where you can withdraw your money any time you want without any questions asked. This policy should also provide that the withdraw should be instant if you are using a credit card to withdraw or should take 1 business day if you withdraw using bank wire technique
Execution Policy - the best execution policy is a no requotes execution policy where orders are executed within one second or less. This means that as a trader you can open & close trades quickly & your trades should be requoted. A requote means that you'll have to place a trade again once the trade is requoted. A requote will happen if the execution of your stocks broker is not fast enough which means that the stocks quote will change before you have completed putting your trade and therefore you have to make another trade.
Stocks Trading - traders should choose a broker that provides a wide range of stocks instruments that they can choose to trade. In addition to stocks instruments traders may choose to select stocks broker that offer other financial instruments for trading such as commodities, CFDs, Futures, Metals such as silver & stock trading and stock indices.
Stocks Platform - choose a broker that uses MT4 stock platform. Almost every stocks broker uses this platform. As a trader make sure that the trading platform of the broker you choose allows automated stocks especially for those traders that trade with automated stocks robots.
A trader might also use other factors to decide what stocks broker to open an account with based on the preference. On this site traders can also find a list of the top 100 stocks brokers on the broker ranking section of this site and traders might use this list to find the broker of their choice.
