The choice of the best broker is decisive for the profitability of the investment. To do so, the trader must take into account certain precise criteria.
Criteria for choosing the best broker for online investments
Investing well in the stock market requires above all the choice of the best broker. In fact, a variety of portfolios make up trading: PEA-SMEs, securities accounts, life insurance, etc. All these envelopes are certainly not risk-free.
You will therefore have to be very careful to avoid risky investments. To do this, the use of a stockbroker is essential.
Moreover, his role is very profitable for the trader. However, many are active on the market without being efficient. Here is how to choose the best broker for your investments.
Stockbroker: Definition and Categorization
The stockbroker is a natural or legal person active on the financial market. He acts mainly on behalf of individuals and acts as an intermediary between his client and the stock market.
With the evolution, brokers now have online platforms on which clients can act directly. The main tasks of the online broker can be summarised as follows:
-Maintaining and managing the trading account;
– Receiving and transmitting orders;
– Negotiating product prices.
The different types of brokers
Before choosing the best broker, it is important to know the classification of online brokers. This is all the more important as it allows you to choose a type of intermediary compatible with your needs.
To assist beginners in choosing a good broker, a broker comparator filters out the most prominent brokers on the market. There are three types of brokers in the financial market:
– The Electronic Communications Network (ECN);
– Straight Through Processing (STP).
The first category allows investors to acquire rapidly transferable products. The ECNs, on the other hand, are « No dealing desk ». In reality, this type of broker plays on transparency by disclosing to customers in time, the prices prevailing on the market.
They are also remunerated according to the volume traded. The STP intermediary does not intervene directly in the execution of orders. Rather, it directs them to liquidity providers while optimising offers.
How is the best broker chosen?
Online brokers are the right people for you to invest in the stock market. This article discusses some of the reasons why.
However, the availability of the provider’s platform is crucial. This solution offers the big advantage of being able to trade at any time and without constraints. To do this, the broker’s website must be accessible at all times. And this, through given criteria.
The fluidity of the site at peak times
What’s the point of hiring a stock market intermediary whose platform is failing at peak times?
Such a malfunction is certainly proof that the investor will almost never be able to place orders when he comes across an interesting offer. Indeed, most profitable trades take place during peak hours.
The mobile display
Mobile navigation is now the big trend. The good online broker must therefore be part of this dynamic. Its mobile-friendly application will allow the trader to act wherever he is.
Reasonable spreads, swaps and commissions
The broker’s remuneration is decisive in the choice of the best broker, but this does not mean that you should choose the one who offers the lowest rates. It may just be a matter of appearance. In addition, the quality of service could be just as poor.
At the same time, high costs are no guarantee of good quality services. The investor must therefore play a real balancing act. To do this, three factors must be taken into account.
Quels spreads ?
A spread is simply the difference between the demand price and the supply price. Depending on the broker, it can be fixed or variable.
The swap is the interest that the client pays as soon as he opens a position for more than 24 hours. For example, the cash resale of a CFD is normally valid for 24 hours. As soon as this limit is exceeded, the swap is immediately applied, but the rate of this interest depends on the broker.
Brokerage fees are the third component of the service provider’s remuneration. These commissions are deducted from each transaction. Either the trading professional deducts fees according to the amount of the order, or he offers a lump sum. However, the latter option is more advantageous for the client.
An authorized site
Online trading is often the breeding ground for many scams as explained here. The worst thing is that these scams result in the loss of a lifetime’s savings.
This is why the novice trader looking for the best broker has to rely on the legality of his partner. To do so, he will have to check whether the service provider is listed by the Autorité des Marchés Financiers (AMF). In addition to this, the seriousness and notoriety of the latter are very important criteria.
Security and diversification
Apart from the legality of the online broker, his bank accounts must be located in a European country. This certainly guarantees the security of the assets.
Moreover, to limit the risks, it is better to opt for the one that gives the possibility to open different accounts. Because portfolio diversification optimises the investor’s gains.
Choosing the best broker: showing originality
In the end, the selection criteria mentioned above are not exhaustive, even though this article presents the essential elements to ensure an informed selection.
It should be remembered that the investor should not simply rely on the price offered by the service provider. Above all, he must ensure the quality of the services and the ability of his partner to respond quickly to his requests.
Finally, it should be remembered that the intermediary’s experience also counts in the choice of the best broker.