How To Choose A Broker: What to Look For And What To Avoid

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Day trading globally and in Australia has exploded through the COVID-19 pandemic for a number of reasons:

  • Individuals have had more time available during lockdown
  • Financial markets have been very volatile, which provides greater, potentially profitable opportunities
  • Sports betting has been effectively non-existent with the absence of sporting events.

This has meant a whole raft of new, individual, retail traders in Australia opening up trading accounts with stock, ETF, CFD and Forex brokers. Here we are going to look at what the newbie should look for in a broker and probably as important, what to avoid!

These are the important factors to consider when choosing a financial market broker:

  • Legitimacy and trust
  • Fees and commissions
  • Trading Platform and Mobile offering
  • Customer Service
  • Research and Education
  • Product Offerings (what can you trade?)

Legitimacy and trust

You need to research the legitimacy of any broker and be able to trust them. Would you deposit your own money in a bank that you have never heard of? Obviously not! So, you should probably do some due diligence and research your broker. Critically, is the broker regulated, and if they are, is it by a respected regulator? Does the broker have history, have they been around for some time? Are they Publicly Listed on a stock market? If the answers to these questions throw up some doubts, maybe stay clear. Checkout online reviews for Australian readers here on FX Explained in Australia.

Fees and commissions

How much are you going to pay to trade? This is a cost to you, the price of the service. You wouldn’t buy a product or service without looking into the price and comparing it to other comparable products or services, would you? Check out the fee structure per trade, is it “paying the spread”? If so, how wide is the spread? Maybe there is a fixed commission per trade, or maybe per month, or even a combination of these. Plus, there may be other “hidden” fees, such as for withdrawals.

Trading Platform and Mobile offering

Is a good trading platform important to you?  This would probably depend on you style or approach to trading. If you are a technical trader, is the technical analysis on the platform user friendly and comprehensive? Does the broker have their own platform, or do they rely on a third-party platform? You can checkout Australian trading platform reviews here.

Is a mobile trading app available for iPhones and iPads, plus Android phones and tablets? Are these apps user friendly and multi-functional? This best trading app reviews would be an obvious place to start.

Customer Service

What happens when things go wrong and you need help? How easy is it to contact the brokers customer service and help desk? What are their hours; 24/7, working hours, just Monday-Friday? Is the support offered by telephone, by email support or online chat? And can you get through, what is the response time?

Research and Education

Is strong and in-depth research significant for you? If you are a macroeconomic or fundamental trader, does the broker provide this type of research and is it any good? If you are trading individual stocks, how robust is their individual company research.

And what about education? If you are a beginner in the world of financial markets, you will likely want to learn. Check out if the broker has any educational offering and if they do, is it in-depth? How is the learning presented; articles, webinars, videos?  Are you able to interact and ask questions?

Product Offerings (what can you trade?)

What does the broker offer to trade? Some brokers offer numerous asset classes; stocks, indices, bonds, forex, commodities, ETFs, CFDs. Do you want lots of options? Or maybe you would prefer a specialist broker, that focuses on a certain asset class.

To sum up, if you are a new Australian day trader, picking a broker is an essential step and by looking at the factors above you should be able to find a good fit for you. It is always advisable to try test out different brokers by opening demo accounts and to do background research.

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