Online brokerage platforms, aka trading platforms, are intermediate web interfaces that connect buyers and sellers of financial instruments. They facilitate the trades themselves via the trading platforms, often in exchange for a fee or a commission percentage. As there are multiple online brokerage services to choose from, finding the right option from a long list can be difficult for someone new to online trading. The selection process can be simplified by looking for specific key attributes which we will elaborate on below.
Identify Your Trading Requirements
If you can identify what you may need from an online trading platform, all you would need to do is shortlist the options that meet those recruitments. For example:
- What kind of financial instruments and assets are you looking to trade?
- Do you need educational resources to brush up on the basics and learn more advanced trading strategies?
- What are your investment goals and expectations?
- Are you looking for any specific trading tool or automation service?
- Are you looking for a simplified streamlined trading interface or a detailed interface designed for expert traders?
- Which region of the world do you plan to trade from?
Any online broker you choose should be in line with your answers. For example, if you wish to trade in shares, cryptocurrencies, and CFDs from South Africa, you need a trading platform like easyMarkets that operates internationally and facilitates trading of all major assets. Similarly, if you are new to online trading, look for an online platform with comprehensive educational resources. On the other hand, if you already have the knowledge and expertise, find a trading platform that can be as minimal or as detailed as you need it to be.
Check for Reputability
The advantage of working with a reputable online broker is that you can always expect a minimum standard of service and an assurance of reliability from them. For a multinational trading platform, reputation is of crucial business importance. They work hard to create and maintain their good name, which works in the investor’s favor. In contrast, a new online brokerage with little to no reputation to back it up is a risky platform to open your account in.
Even if they are not one of the many scam trading sites, there are additional risks to consider. An online brokerage without a history has no obligation yet to live up to pre-established standards of safety, security, client service, and reliability. It does not mean they won’t build a good name for themselves down the line, but neither does it mean they will. From an investor’s perspective, it’s an additional risk that’s best avoided.
Look for Assistive Features that Suit Your Trading Skills
If you are not sure about the trading assistance features you are going to need, then you should be looking for an online brokerage with full support for beginners. There should be an opportunity for you to grow as an investor in time but expect the safeguards and automated stop-loss/limit measures in place to keep you from making big mistakes initially.
An expert trader will be looking for more advanced features such as specific technical indicators that are pertinent to the kind of trade that they are interested in. For them, it would be better to try out the software’s features for a while. Go through the ones you need to see how well the Bollinger Bands and Fibonacci sequence indicators work in practice. Also, look for tools that could be beneficial for your planned trading strategies.
Find a Brokerage Model Profitable for Your Trading Volume
As of 2023, most online trading brokerages do not charge a fee or commission for completing trades via their platform, but some of them do offer paid memberships for a higher tier of services. Given that online brokers are business interfaces, it’s important for investors to understand how the platforms continue to generate profits without charging a direct commission.
Trading platforms generate their income from free trades via a different kind of compensation system called Payment for Order Flow (PFOF). It creates a small delay which may or may not be significant enough for a trader, depending on how long the delay is, as well as the volume and size of their trades. For paid members, there should be no PFOF to delay transactions as they are already paying a membership fee.
A paid membership might also grant access to more tools and resources, depending on the specific trading platform and the plan in question. For high-volume traders and big investors, it makes more financial sense to remove PFOF from the equation. For beginners and low-volume traders, payment for order flow is likely to be a more profitable brokerage model to work with. Choose whichever one makes more financial sense for your own trading requirements.