When it comes to finances, online brokers offer us a new toolset and the freedom to make investment choices to protect and increase our capital by ourselves.
In the last few years, many providers have jumped on the growing popularity train of online trading platforms. This did not only lead to many scam services but also increased the variety in service scopes and features found in trustworthy broker options.
How do brokers differ from one another, and how can we find the right fit for our specific trading goals and methods?
Online Transactions: Security Comes First
The online setting can be risky when we are using personal information, especially when it comes to our finances. The lack of transparency can quickly lead to scams and stolen data. When trading online, we:
- enter personal information
- enter bank account information
- deposit and risk large amounts of money
Since the speculations in trading are already risky by themselves, we need to make sure the service we use to invest is secure, and fair, and offers us helpful resources to make good decisions.
Online Brokers with Licenses
In most cases, the first step leads to looking for a broker with a license. International financial authorities create regulations and offer licenses for the services that are provided by them. These brokers are guaranteed to be compliant with the local law.
If there are any problems, you can expect legal support from the authorities.
Online Brokers without Licenses
Some reputable online brokers do not have a license. This can be the case when trading with binary options.
Many international authorities have banned binary options trading because the method has attracted many scam services in the past and the use of leverage makes it especially risky.
If you want to trade binary options, you will most likely need to look for a broker service without a national license.
In this case, user reviews and experiences are your best tool to find a secure service.
If you google reviews, you can find many websites that have examined these providers or used them themselves and are now sharing the pros and cons of using the specific trading platform.
Different Service Scope of Online Brokers
With the question of security out of the way, we need to look at the features and characteristics of a broker, to find a service that has the right tool set for your specific trading needs.
There are several factors that can differ between multiple broker providers:
Markets & Assets
There are countless markets and asset types available in the world.
No broker allows access to all of them simultaneously. If you are looking to invest in a specific type of asset, like the mentioned binary options or international stocks, you will need to find a broker that includes them in their service.
Many online brokers are specialized in a specific type of trading, and thus are more suitable for day trading, trading cryptocurrencies or any of the possible trading focuses.
Resources
What sets online brokers apart from brokers we can use with our bank is a lower cost and greater flexibility. However, while our bank often offers us a personal advisor, online trading platforms mostly lack this level of guidance.
Some broker services offer a greater level of educational resources and tools than others. If you need some trading advice, it pays to look for a broker that offers how-to-guides, video tutorials, glossaries, statistics, and more.
Special helpful features are social trading and demo accounts:
- Social Trading: Here, the users of the broker service are part of a trading community that can share its knowledge with others. You can access the successful investment portfolios of other users and choose to copy them.
- Demo Account: The demo account gives you fake funds to try out the broker’s full-service scope without risking any of your own money. It can help you figure out if the features and user interface suit your needs.
Pricing
No broker service is 100 % free. While some chose to forgo specific charges, there are always some costs, like commissions or inactivity fees. Do not select the broker with the most promising ads and read the pricing and execution fine print.
Depending on your trading style, some brokers can be more cost-efficient to use than others.
If you day-trade, for example, you can pick a broker with a high overnight fee, since you sell all your assets within the day of purchase. In the fine print, you will also receive information on minimum deposits and maximum withdrawals, and other limits and extra charges.
Promotions
Some brokers offer promotions to attract users to their service.
These can be great chances. However, you should always read the terms and conditions closely, or you might end up with a service that will cost you hidden fees you were not expecting to pay.
The promotion should never be the sole reason to select a specific service but can be a deciding factor when comparing two providers.
Conclusion
The service scope of online brokers can differ in multiple ways. They offer different types of markets, assets, fees, and features.
Depending on your own expertise and investment goals, it can pay off to choose a specific broker over a different service. User reviews are a great tool for differentiating between online brokers and figuring out which trading platform suits your individual needs best.