Posted by forex at 4:32 AM
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1. Evaluate your investing or trading strategy to understand what is important for your lifestyle. How frequently will you trade? Do you need access to international stocks on foreign exchanges? Do you plan to trade only stocks, or stock options as well? Will you also use your brokerage service as a regular bank account? Comparisons between online stock trading services will depend on these answers.
2. Consider the frequency with which you will trade and its relationship to commissions. Fees and commissions are usually the most considered variable for consumers, but this is not always a necessary concern. Individuals who make just a few stock transactions per month will be less affected by commission rates than those who trade every day. And even relatively high commissions are relatively insignificant for investors who manage large sums of money, as the cost-per-share is usually very low.
3. Also consider order execution speed when studying the frequency with which you will trade. Day trading brings into the discussion a whole new set of criteria for comparing online trading services. While active traders incur hefty transaction fees, they also require fast execution times, as profits are often split-second. Long-term investors will usually not be affected by slower execution, so this is not relevant for them. A careful analysis of your trading style and frequency will determine whether transaction speed is important.
4. Stock options substantially extend the investment and trading strategies for stock transactions. Some online brokers specialize in stock option trading in addition to regular stock orders. There are significant differences between the online services for trading options, so this warrants careful comparison if you are interested in these strategies.
5. Most online trading services have limited or no access to international stock exchanges. For many investors, this is fine. But some seek control over specific companies in other countries, and for them a global trading account is required. These are not hard to find. Global trading services are an important consideration when comparing online services, if this requirement applies to you.
6. It is popular to extend the services of an online trading account to those of a regular bank. But not all online stock trading services offer this. For many individual investors, this is a significant benefit of an online trading account. When comparing online brokers, study their extended services to see whether such features might benefit you.