Online Trading Through Discount Brokers

If you are an online trader, or wish to be so, you can trade markets and products through two different ways. First is through a full-service, also may known as traditional, brokerage firms. Second is through a discount brokerage firms. First way is costly but is usually safer as there shall be experienced/educated fellows who can help you in making right decisions. Second way is less-costly but demands you to make all decisions your own.

Online trading through discount brokers is only suitable for well-educated and experienced traders who can analyze data, predict trends, place orders at right time and who can limit the trading risks. Discount brokers provide traders access to market information via a web based or installable trading interface (known as trading system). The system should also have some market/data analysis tools, indicators, and supporting tools for making the traders’ work easy. Some discount brokers offer delayed access to markets, some others offer direct (real-time) access to the market, which most offer both – usually on different trading systems.

Choosing the right discount broker for online trading demands good broker knowledge. One can find broker features from the broker site itself. There are also so many sites which have individual broker reviews and comparisons. Suggestion is that go through more than one site for getting more insight. While most online brokers operate exclusively through internet (some also via phone) there are also some brokers who operate through branches. One should consider many factors when finding the discount broker most suitable for him/her. It is a good practice to prepare a checklist suiting your trading needs and evaluate brokers according to that. Below are some items which should be in your checklist.

1. Commissions Charged: You are trading with an online discount broker for simply reducing the commissions and fees involved in trading. Brokers offering lowest commission rates are always preferable but double check the conditions and requirements (if any) that you should satisfy for getting the lowest rates. Also check other fees which may involved including inactivity or maintenance fees, software usage fees, and so on.
2. Your Trading Style and Goals: Are you a part-time trader or day trader or position trader or investor? The brokerage firm that you choose should suit your trading style. If you lack substantial trading knowledge, choosing a broker who offer discounted rates for broker assisted trades should be better. If you are a very active trader, you should trade with a direct access broker charging deep discounted commissions.
3. Account and Margin Requirements: For getting cheaper commission rates than normal, most discount brokers demand you to fulfill certain requirements. Or they may have different accounts with different commission rates and different account requirements. Go through all of them and choose the one best suits you. Going blindly for ‘cheap’ is not always a good option.
4. Trading System: Simply, a trading system you use should best suit your trading style. You hardly can day trade the market with a free or web based or limited-feature trading system. Similarly if you are an investor going for level 2 trading systems can cost you high. Things to notice include charting packages, tools available, speed, usability and stability.
5. Special Offers: Most discount brokers have special offers for new customers, like free trades or reduced account requirements and free credits. When all other things are good, going to broker who offer you better offers is good.
6. Additional Products offered: Many discount brokers allow account holders to trade different products, like options, futures, funds and bonds. Many brokers offer NTF (No Transfer Fee) funds, which can be an additional benefit.
7. Customer Service: Simple, ‘No Compromise’ on that.