Stock market brokers are an essential part of your trading platform, whether you trade online or offline. Simply put, without a brokerage account, you can’t make a trade, and if you can’t make a trade you can’t make money. But not all brokers are the same, and choosing one that will meet your goals and understand your needs takes time and research. Not all brokers are right for all investors – that is, there is no ‘one size fits all’ solution. Traders just starting out generally have different goals than older investors who have been trading for many years.
Types of Brokers
There are two types of brokers to choose from: Regular brokers are those who deal directly with their clients; and broker resellers, who act as intermediaries between their clients and larger brokerage firms. Generally speaking, regular brokers are considered to be more reputable and trustworthy than their broker reseller counterparts. That doesn’t mean, however, that all broker resellers are bad. It just means they should be checked thoroughly before signing on with them.
Stock market brokers can be broken down even further, between full service brokers and discount brokers. As the name suggests, full service brokers offer more one-on-one personalized service, but it comes at a price. Still, for new investors, this may be an ideal option. Discount brokers offer much cheaper prices for each trade, but you will have to do much of the legwork and research on your own. There are many online discount brokerage firms and most of them offer e-courses and other education modules that can help you make informed trades, if you don’t want to pay for a full-service broker.
Minimum balances and withdrawals
Most stock market brokers and firms have a minimum balance requirement in order to open an account. This can range from $500 to $1,000 depending on the firm. Some brokers make it difficult to withdrawal money, even though it’s yours. Each firm has its own set of rules and regulations, so make sure you read and understand them before opening an account.
Your trading style can be indicative of the type of stock market brokers you choose. If, for instance, you want to day-trade, then a discount broker will save you money in execution fees. If you are a buy-and-hold investor, then having a full service brokerage firm to give you suggestions may be best. Taking all of the above into consideration will help you make a wise choice when it comes to choosing the best broker and firm to work with.