When you’ve decided to take up online trading and the time comes to choose an online broker, it can be difficult to know where to start whether it’s crypto, forex or any other type of market. There are so many different platforms available, each with its own set of features and benefits.
How do you know which one is right for you? This blog post will provide some tips on how to choose the ideal online broker for your needs.
Consider the type of trader you are
One of the first things you should consider when choosing an online broker is what type of trader you are.
- Are you a day trader?
- Are you a swing trader?
- A long-term investor?
Each type of trader has different needs, and not all trading platforms will be a good fit for every type of trader.
If you are a day trader or a scalper, you will need a broker that offers low fees. In short-term trading you are taking smaller profits and a hefty fee will eat into that.
On the other hand, if you are a long-term investor, you are probably most concerned with tools for strategies like dollar cost averaging. Good, long-term holder focused platforms let you automate your dollar cost average easily.
Similarly, you also need to think about the types of assets you are interested in. For example, if you are only interested in forex trading, you will need to find a good broker that offers forex trading. When it comes to online forex brokers, you have to remember that not all of them are created equal. It is important to do your research.
On the other hand, if you are interested in trading both crypto and forex, there are platforms that combine both.
Likewise, if it’s stocks that interest you but you are also a crypto trader, some crypto trading platforms now make tokenized stocks available.
Think about your trading style
Another thing to consider when choosing an online trading platform is your trading style.
- Do you trade every day or do you prefer to make a few trades a year?
- Do you trade large or small volumes?
Depending on your trading style, some platforms may be a better fit than others. For example, if you trade frequently but with low volumes, you will need an exchange that has commission discounts coming from something other than traded volume. In the crypto trading industry, exchanges will typically offer fee rebates for holders of their exchange token.
If you don't trade often, the commission might not be as big of a concern for you. You might just prefer a time-tested, reliable broker - whatever the fee. It all depends on your individual needs and preferences.
You also need to think about the types of orders you will be placing. Some brokers don’t offer advanced types of orders like the trailing stop, one-cancels-other or even a limit stop.
Some scalping strategies need you to place a lot of trailing stop orders, for instance, so to trade in that style you will want to find a broker that offers this type of order. Conversely, if you don't place many stop limit orders, this may not be as important to you.
From there, you also need to consider the platform. Some brokers offer platforms that are easy to use but don’t have many functions. Others offer a lot of advanced functions but in consequence, the trading interface ends up optimised only for the power user. That kind of platform can be confusing for many. Some platforms offer a switch in their trading app where you can choose between a simple and an advanced interface.
Look into the fees involved
As mentioned above, an important consideration when choosing an online broker is the fees involved. Make sure to compare the commissions and other fees charged by different brokers. Some brokers charge higher commissions than others, so this is something you might want to take into account if you trade often.
You should also look at the fees charged for different types of orders.
For example, the brokerage fees are usually higher for market orders than for limit orders. Some brokers charge the same fee for both, which might suit you better. Again, it all depends on your individual needs and preferences.
Factor in your investment goals
When choosing an online broker, you also need to consider your investment goals.
What are you looking to achieve with your investments? Are you looking to grow your portfolio or generate income?
Depending on your investment goals, some brokers may be a better fit than others. For example, if you are looking to grow your portfolio, you will want to find a platform that offers a wide range of spot markets. As an investor, you will want to buy the asset on a spot market and hold it.
On the other hand, if you are looking to generate income, you may be more interested in finding a platform that offers perpetual swaps with low brokerage fee or similar affordable speculative products.
Ultimately, there is no "perfect" online broker. The one for you will depend on your individual needs and preferences. By considering the factors above, you should be able to narrow down your options and find the best platforms for your needs.
There are plenty out there though, so whether it’s forex, crypto or stocks, rest assured that with a little bit of research you will be able to find the ideal online broker for your needs.