So you have decided to start trading online. That’s great but in order to actually do trades, you will need to do a deal with a stockbroker either online or in person. Online Trading accounts have lots of advantages: they have smaller fees and can be open a lot faster. They will also allow you to have more independency as you can trade from everywhere in the world and mostly at anytime.
Normally a personal stockbroker will also provide you some directions in regards to trading strategies but let’s not forget that online accounts also come with educational materials and if you want also professional guidance that will allow beginners to improve overtime. But what is the best online broker? Well, it will mostly depends from your needs and goals.
1 – Ensure you have enough capital to invest
The most important thing before starting to trade online is to ensure you have enough capital that you can invest and that you can afford to lose. Surely you don’t want to lose those money and this is not what we mean but there is a risk that this will happen and if the worse will happen you have to ensure you wont’ end up broke. You should keep about six month’s worth of wages in savings. This is a good way to protect yourself against the unforeseeable life events like losing your job or becoming ill. Any money that is left will be your risk capital.
2 – Consider offline options
Before signing up for online trading make sure that you have considered all the different options. Explore offline options as well as after that even if you end up trading online you will know what are the pros and cons of going offline. Even if online brokers are getting better and better in regards to the service that they do provide, offline brokers still have an edge in that sense and can offer expertise that online broker cannot. So before committing to online brokers explore all the opportunities available in the offline world.
3 – Determine your investment style
If you are planning to trade online you need to determine what will be your trading style. This will help you in finding what is the best trading platform for your needs. If for example you are planning to do more day trading than you will need to have a trading platform that is a lot more responsive and that it will have lower pre-trade fees. If on the other hand you are planning to do long-term investments than you can also have a platform that has higher trading fees but will offer other added values like education, assistance and so on.
4 – Select a number of brokers
First thing to do is to select those trading platforms that are reputable. You need to ensure you are not going to a rogue broker and in order to do this you should check if the online broker is fully licensed and regulated by the Financial Conduct Authority in the UK or in other reliable legislations. If you are in the UK we strongly advise to sign up with online brokers that are not FCA regulated.
5 – Ensure you meet the minimum deposit amount
The first thing you will need to do is to check that the online broker minimum amount to deposit will not be higher than your budget. The broker’s minimum account balance is the smaller amount that you can deposit in order to start an account. With the increase in online broker competition this amount has reduced significantly over time and in most cases you only need around £100 to start trading. Having said that the more you are able to deposit the better type of trading accounts you will be able to get which means this is an aspect that you need to consider carefully as it does change from provider to provider.
6 – Check online brokers fee structures
Online brokers fees can change significantly. Some are charging a monthly or annual fee while others have fees per trade with spreads. Even the spreads can be very different from online providers to another. It is very important that you will be confident with the type of fee structures of the online broker you will select and also how this compare with the competition. In our online broker comparison page we have highlighted what are the pros and cons of every provider so take a good look to familiarise with the offering and costs.
7 – Determine what service you need from the online broker
It is important to have clear in mind what are the services needed from the online broker. Some have a long list of services that you might not need from the start and that will just increase your bottom line costs. If you plan for example to do quick daily trades than you might want to focus on the best advanced tools that will potentially give you an edge. If you are planning to be a more passive investor than you might want to skip those advanced tools and focus more on market information and educational material that will help you to make better long term decisions.
8 – Get the online broker that best meets your needs
Once you have narrow down the list of the online brokers it is time to pick the one that will best meets your needs. At this point you will have a clear understanding of the costs and also of the things that you most need for from broker so the decision should be quite straightforward. Select the online broker the best fits your need.
9 – Register your chosen broker
One you are happy with the broker go ahead and create a new account. You will need to provide some information like your email address, username and password.
10 – Provide documentation
It is perfectly normal that during the opening of the account you will be asked to provide documents to prove your identity and financial information. Just follow the process and provide whatever is needed and you will then be able to get access to your new account.
11 – Deposit the money into the newly created broker account and start trading
Once you have created a new account make a small deposit to see that all is working as expected. As you are still in a testing phase we do suggest to start with small deposits and even try some withdrawal just to check that everything works seamlessly and there are no problems.
12 – Try out the tools and services offered by your broker
It is important that you familiarise with the tools offered by your online broker. Learn and take advantage of every service that the broker is offering you. Even if you don’t need all the tools make sure that at least you know what they are there for since you are paying in some way or another for them anyway.