Finance

Online vs. Traditional Brokerage – Which is the Right One for You?

The emergence of the internet has completely revolutionized the stock market trading. Not so long ago, if you wanted to do it, you needed to visit or make a phone call to your broker and have them place buying and selling order for you. With the internet came a different approach that simplified the entire process and you can now do everything through an online broker. Nowadays, relying on either online or traditional brokerages makes sense and it’s all about deciding which one is right for you. With that said, here’s how you can see which option makes more sense for your needs.

Costs involved

Today, trading costs are considered to be one of the biggest differences between online and traditional brokerages. With online brokers gaining more and more popularity, it was necessary for traditional brokers to increase their fees. This was mostly due to how much work they’re supposed to do for each client and the numbers of clients they have significantly reducing. Quite contrary, online brokerages now have so many clients that they can even afford to provide various free of cost trades every quarter. Just keep in mind that not all online brokerages charge the same and doing your research before opting for one is a must.

Work hours

This is another huge difference between traditional and online brokerages. Traditional brokers usually work the same hours to that of the stock market hours which is 9.30 to 4.00 PM. This means that if you work with a traditional broker, you’re simply unable to place buying and selling orders outside their work hours. Online brokers, on the other hand, work 24/7. Online trading happens throughout the day and throughout the week, allowing you to set your own schedule and stick to it. The best part of it – no additional costs are included if you want to trade outside the stock market hours.

Personal relation

Another reason why traditional brokers tend to charge more is that they do more than just placing buying and selling orders for you. There’s also the personal relation with clients that you simply can’t get when using an online broker. A traditional broker can provide you with advice and guidance, especially during your early days as a trader. People who think that interaction is beneficial often choose to trade through traditional brokers. When trading online, you don’t get to meet the broker you work with. However, even that is starting to change as some online brokerages now offer assistance to their clients.

Convenience

As mentioned earlier, when using a traditional broker, you have to call or visit them in order to make trades. This isn’t necessarily the most convenient thing to do, especially in times when almost everything happens on the web. Trading online is way more convenient as you can do it whenever you have an internet connection. On top of this, as long as you’re online, you can stay updated with what’s happening on the stock market. When trading online, you can also choose from a number of online brokers and find the one that fits all your needs. You can find and compare brokers at AskTraders to identify the ones you should turn to.

Fraud

In this day and age, working with both traditional and online brokers is as safe as it can be. With online brokers, you’re given the full control over your transactions, eliminating the risk of any potential fraud. That is, of course, only the case if you turn to a renowned online broker. Working with a traditional broker may seem a bit riskier as you’re relying on someone else to make trades in your name. Still, there are all kinds of regulations traditional brokers have to meet and you can trade through them without having to worry about your money.

Knowledge

When working with a traditional broker, you get all the guidance you need to make the right trades. This allows you to learn and improve your trading skills on the go. Beginner traders who decide to operate online can easily get carried away and start buying and selling stock without doing proper research. However, online brokerages are constantly working on helping their clients improve their skills. This is why they provide access to the research reports and technical analysis to all of their account holders. Some brokers even offer online trading simulators that allow you to test your skills before you start trading using real money.

Final thoughts

Although they offer the same type of service, traditional and online brokers differ in many things. It’s up to every trader to decide which option suits their needs and trading skills. Just have in mind that no matter what type of brokerage you opt for, it’s very important to do your research and make sure you turn to a broker you can trust.

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Anna is a tech writer and researcher interested in startups, web development and business innovation. She is passionate about motivation, self-development and yoga. A recent hiking enthusiast, she enjoys exploring new trails and breathtaking views.

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