Choosing the best online trading site boils down to deciding your priorities. While some traders do not mind paying higher commissions to trade on a modern platform, some others consider costs above everything else.
Therefore, some of the key factors to be considered when choosing the best option to meet your specific needs are as follows:
#1: The minimum amount to be deposited to start trading
How much does the online trading platform provider wants you to invest so as to start trading? Typically, the initial deposit specified by online trading sites could be $1,000 or more. This is because it is difficult for brokerages to make money through small accounts. Most mutual funds also specify a similar amount as minimum investment. Another reason is that it is difficult for you to ensure proper diversification if the investment is less.
However, there are a few highly ranked brokers that do not specify any account minimum. Ultimately, it all depends on your specific needs. If you have to work with a broker that specifies higher minimum account balance requirements in order to achieve your financial goals, then you should collect money in your savings account and transfer it to your trading account when you have funds.
#2: Commissions on your most-used investments
Commonly, online trading sites allow you to invest in the following instruments:
– Stocks- Forex or currency pairs- Commodities- Indices- Options- Mutual funds- Exchange-traded funds- Bonds
Depending on the investment instruments offered, an online trading site will specify the amount you will have to pay as commissions for each trade you execute on the platform. Try and ascertain as to how much commission you will have to pay, especially for your preferred investments, prior to deciding to work with any one of the online trading sites under your consideration.
For example, in the case of stocks trading sites, you will be required to pay a commission on per trade basis. When it comes to options trading sites, a per-contract fee will have to be paid in addition to the trade commission. Some forex trading sites make money through spreads, while some others charge a fee or commission for each transaction.
If you pay close attention, you will realize that all online trading sites do not offer the same fees and commissions. It can vary from one site to another. Therefore, you need to choose an online trading site on the basis of which investment instruments you are planning to use. This way you will be able to work with the most cost-effective site.
#3: Account fees
It may not be possible for you completely avoid all the fees, but you can always strive to make it as low as possible. Some brokers slap a charge for transferring funds or closing an account. When you shift your trading account to another site, the new broker may reimburse a part of your transfer fees. You can avoid most other fees by choosing a site that doesn’t impose such charges or by opting out of the services for which you have to pay an additional amount. Fees charged by sites commonly include the following:
– Annual fees- Inactivity fees- Fees for trading with broker’s assistance- Fees for using the trading platform- Additional fee for research and providing data- Paper statement fees
#4: Trading style and technological needs
If you are a beginner trader, you may not trade too frequently. In such a case, it is better that you avoid brokers charging an inactivity fee. You must therefore look out for sites that offer the investment instruments you are interested in at the most competitive price. In such a situation, you may not need an advanced trading site which will cost you more.
However, you may need a little little bit of education and hand-holding in the initial stages to learn the nuances of trading. As such, you should identify an online trading site that provides a lot of educational videos and tutorials and webinars on their site. Many sites offer such services free of cost to their account holders.
If you are an active trader, you might want to work with an online trading site that supports the same. In such a situation, you must weigh the broker’s trading platform, analysis tools provided, research as well as data offerings and fees and commissions charged prior to deciding to choosing the site.
#5: Site Promotions
Online trading sites often announce deals for new customers, including specified number of commission-free trades, cash bonus on deposit amounts, etc. You should not choose a trading site based on the promotional offer, but you should make use of promotional offers.
Summarizing, this is not an exhaustive list of factors to look for when choosing the best online trading site. However, these are the key factors you must consider in order to have a great trading experience.