Investing in asset classes like bonds, stocks or mutual funds can result in higher returns for individuals than storing money in a bank or a fixed deposit. Every day millions of retail traders try various strategies and different techniques to make a profit but they often lose more money than they make.
This is why it can help to use a retail broker when trading. However, the number of traders being conned by brokers is rising so you need to be careful when picking one. If you want to invest profitably, you need to use a broker who fits your investing goals, educational needs, and how you learn, especially if you’re a new investor.
Some traders avoid using brokers because of their fees but they forget how much benefit they can receive from their solid market knowledge. Of course, you will want to lose as little of your investment returns as possible to fees and trading commissions.
With payment for order flow, a broker receives a small payment as compensation for directing your order to a particular market maker. Daytradingz.com offers more information about this practice and gives some interesting payment for order flow (PFOF) statistics. The number of trading venues and pricing pressures placed on market makers works in favor of you receiving good prices.
Wherever your money is involved, you probably want to know what’s happening. A retail broker will keep you informed and provide you with the information you need. The law compels regulated brokers to be transparent with clients. This assures you of safe, fair trading. Looking at past financial reports can assure you and if these aren’t available, it’s a big red flag.
There are different levels of transparency you may require, depending on your level of expertise. You may just need a platform that makes it easy to execute trades or you may want a broker with more resources to help you identify opportunities.
Access to trading information
You will lose money if you don’t do your research and make an investment without understanding the economic environment, the specific sector, and much more. Retail brokers have experience in the financial markets and can offer the information you need.
When you’re starting, you may prioritize aspects like educational resources and easy access to support staff. Informative blogs and tutorials will help you to understand more. If you have some investment experience, you may want higher-level educational and opinion-based resources by professional investors. As your knowledge grows, you may want access to advanced charting capabilities, conditional order options, and more trading options.
Protection against fraud
Major global financial institutions usually regulate brokers and they are all governed by different laws. Regulations help to protect traders from fraud. The regulations governing brokers prevent them from ripping you off. They can’t be involved in illegal activities, such as manipulating market prices.
If you encounter a problem, your broker can help you to sort it out. Using a regulated broker reduces your risks of losing your hard-earned money.
Test different platforms
The best way to test a platform is usually to give it a test drive. This allows you to see what kinds of tools and resources are on offer.
Some brokers allow you to open an account for free. It may be worth the effort of going through the signup process to access a trading platform and see whether it’s the right one for you. What is user-friendly for one investor may not be for you, so it’s important to find a platform you can work with.