How do you Choose The Ideal Broker?
Hey Traders, Rishi Patel, co-founder of Master the Markets, Elite Traders Conference and The Traders Open Day.
A very warm welcome to this video which is all about how to choose the ideal broker.
We’ve been asked this question numerous times, even by the 20,000 that myself and Thiru have now coached in the time we’ve been in the financial markets. Even this morning, as we ran a live trading webinar for people to watch and see our live trading, they were asking the question, how do you choose your ideal broker or who do you trade with?
So we wanted to answer this question. There are three key things that you need to look out for when selecting a broker. The first and most importantly is regulation. You have to find a broker who has got regulation. In the UK we are regulated by the Financial Conduct Authority. So if you go onto the broker’s main website and you scroll down you’ll see at the bottom more than likely if they are regulated by the FCA they’ll probably put that on the homepage in the footer. It will say ‘Regulated by the FCA’ with a financial registration number etc. Be on the lookout for that as the first thing: regulation.
The second thing that you have to look out for is instruments – which instruments do you want to actually trade. Some of you may be trading foreign exchange. Some of you may be trading equities, commodities – whatever it is, make sure you have done the research on that broker to make sure that they are providing the instrument set that you are looking for. For most of you if you’re trading foreign exchange, for example, you’ll need to make sure they have the currency pairs that you’d like to trade. Generally most brokers that offer the FX range will have all of the majors. If there are some exotic currencies that you’d like to trade specifically according to your trading strategy that you’ve custom built, then obviously you would need to look that up and make sure that that is an offering. Do make sure you have a good heads-up on what instruments the broker will offer you.
The third thing to be on the lookout for is the fees. Fees that the broker offers are actually split into two key sets of fees. The first set of fees is the commission and the swaps. So make sure you check with the broker that they offer a very specific set of commissions and swaps that you’re comfortable with. These are the overnight charges when you hold currencies, for example, for those of you that are swing trading or you’re holding a stock for a multiple amount of days, they’ll be some fees or commissions. Sometimes swaps in currency have associated charges. Sometimes you’re paid in interest depending on what you’re doing. Generally if you’re buying the Aussie dollar, you’ll be paid an interest rate as at today. If you’re selling the Aussie then you’ll have to pay. These are swap charges and you need to be on the lookout for what these are and they will vary from broker to broker. So be on the lookout for that. The second type of fees that brokers generally charge, actually in all cases, are spreads. Spreads are obviously the distance between your actual bid and the ask price. So you need to find out what the spreads are as per the different brokers. Some brokers will offer a might tighter spread but may not necessarily be regulated. Some brokers are regulated here in the UK but their spreads are very poor. So you do need to find the right balance for you.
I trust that has added value and until the next time, as we always say, stay disciplined, follow your plan and Trade Like a Master.