There is no doubt that paying high brokerage charges on your profits can be a very painful experience. However, it is not advisable to focus on the price alone. Instead, you should try to consider the overall value for money before taking a final decision.
Make sure you consider these factors along with the price before choosing your online trade broker.
Real-World Contact Information
The importance of this information cannot be overstated. Every broker you deal with should provide office location and contact details without being asked to do so. This should be clearly stated on the website. Absence of this information is a clear indication that the broker cannot be trusted.
The real-world address is the end-of-the-world insurance. If things go wrong, you will at least know where you can meet the broker in person. Avoid an online trade broker who tries to avoid sharing detailed contact information and who requires you to communicate solely through online chat and email.
Range of Products
You may be focusing on equity trading for now. However, you may feel like expanding into forex trading or portfolio management in the future. A broker who offers a wide range of services at an affordable price will be preferable if you intend to carry out short-term trading and long-term investment simultaneously.
On the other hand, a broker who offers restricted set of services at a low price will suffice if you are certain you don’t intend to move beyond short-term equity or forex trading anytime in the near future.
Alternate Trading Options
The option of calling in your trade instead of transacting online can prove very beneficial if you are juggling your trading activity with other jobs. Paying a premium for every trade that you call in may be worth as long as you have this extra option at your disposal. A broker who charges a very low commission but who offers no alternate trading facilities may turn out to be a bad choice if you want multiple options at your disposal.
The biggest advantage of choosing a discount broker is that you can make money by investing small sums into the market. However, this advantage can get nullified if you are required to invest a large sum as the minimum investment. If you had so much money at your disposal, then you would have considered premium service providers offering numerous other facilities and services, right?
Functional Online Terminal
Would you buy a car without an engine just because it is available at a 50% discount? Certainly not. A car without an engine is not a car. It is just a piece of metal with no functional value. In the same way, a broker without a robust and reliable trading terminal is best avoided even if you are allowed to trade for free.
Working on a sub-par terminal can be very frustrating. You may see opportunities to earn a profit slipping away for no fault of yours. Never compromise on quality of service in exchange for affordable charges. It is preferable to reduce the scale of your trading activities instead of dealing with a sub-par online trade broker.
Quality of Customer Service
This may seem irrelevant in the larger scheme of things but poor customer support can lead to a lot of heartburn when something goes wrong. Having to send multiple mails and make numerous calls to settle a minor error or issues will affect your overall productivity.
Remember, you are paying less because the trader does not offer a wide range of services. At no point should you have to compromise on quality of support in exchange for the discount you are enjoying.
Many traders make the mistake of thinking that the online trade broker cannot afford to offer goodies. Despite the discount, your broker is probably making a tidy profit from your trading activities. Hence, don’t hesitate to demand extra goodies to sweeten the deal. Keep this point in mind when comparing different brokers. Of course, don’t let the prospect of goodies and freebies sway you into dealing with an unscrupulous broker.