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How to Choose a Stockbroker Online

Thanks to the Internet, investing in the stock market has never been easier. From your own home, 24 hours a day, you can buy and sell stocks, shares and their derivates, while benefitting from stockbrokers' fees which are often lower than that of your traditional banker. But don't allow yourself to be deceived by the simplicity of things: the difficulties which will stand in your way will be the same ones as in the offline world - or even worse.

First of all, it is up to you to choose your broker - the financial establishment to which you are going to entrust the management of your wallet. In this hyper-competitive market, rates vary considerably from one broker to another, both at the level of the brokerage fees as well as costs of subscription to the services offered. You need to decide upon your personal combination of priorities in order to choose the stockbroker who offers the best choice for you. You should look for a broker who offers, at the same time, the most powerful management tools, the least expensive charges and are the most generous in providing accurate and up to date information.

The choice of your broker will depend mainly on your stock market activity. It is obvious that an infrequent investor whose intention is to buy and hold every now and then may be better off with a different service to a regular speculator in stocks and shares who buys and sells on a weekly or even daily basis.

Before commiting yourself to one particular stockbroker, you should ask yourself a few questions. What will be the total sum of your investments? How many orders are you likely to place per year? Are you going to invest on a long term basis or to speculate for quick profits?

To compare stock brokers and to find the least expensive can be quite a complicated exercise. Often stockbrokers will display their rates in grid-like tables, which are complex enough to become totally lost in! Many packages exists of both variable rates of commission (normally depending upon size of trade) and fixed rates (regardless of trade size). Moreover some brokers display their charges net of tax whereas others may display charges before the addition of tax.

In summary the most competitive broker for one inverstor will not be the same as the best choice for another investor, depending on the investor's profile. It is a good idea to draw up a check list when choosing whose service to use. For example:

  • Is the opening of your trading account free or is there an initial set-up fee? What is the required minimum deposit?
  • Access to service: Is it restricted to the Internet or is it possible to place orders by telephone?
  • What type of products can I trade? Does the stockbroker trade in USA stocks only or are UK and international stocks and shares included. Can I trade in bonds, warrants, futures and foreign exchange?
  • Based on my probable average trade, how much would the commission be?
To avoid any nasty surprises, and to ensure that the stock broker's charges don't eat up all of your profits, do not hesitate to telephone or email to ask for a estimate of your future rate of charges. It is free and this commits you to nothing.

When you do actualy come to sign up to a stockbrokers' service, many additional offerings may be proposed to you, for example management of your checking account, personalized trading advice, SMS alerts, newsletters. Of course, not all of these are necessarily free. Carefully read the clauses of the contract before ticking the boxes.

One extra tip is that you should know how to use the advantages of the Internet, like forums and blogs. Free and independent, the opinions of net surfers may often be more useful you than those of your broker!

External sites: Mahdi Stambouli's Day Trader site
Michael Revault's Investirenbourse.

Some Online stockbrokers which you may wish to check out. Discover the useful indicators and their formulas which make up the interesting subject of Technical Analysis.

Read William P. Hamilton's thoughts about Stock Brokers and Market Specialists from his fascinating book from 1922.

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