Trading conjures up images of unbelievably rich figures like Gordon Gekko and The Wolf of Wall Street overseeing the buying and selling of millions of dollars through rows of bulky computers. However, the industry has changed dramatically since the 80s and 90s, and now you don’t need a stockbroker to tell you what trades you should be making. In fact, you don’t even need a computer!
The technological revolution in the trading sector means that today’s investors can place their own trades on whatever device they like, be that a laptop, smartphone, or tablet. As a result, this area of finance is more accessible than it’s ever been before. All you need to get started is to choose a trading platform. But when there are so many providers on the market, how do you select the best one for your needs? Here are five things to look out for.
1. Choose one that educates and supports its customers
There’s always more to learn when it comes to trading, and choosing a platform committed to educating and supporting you will give you the best chance of success. This is true no matter how experienced you are, but it’s especially important for beginners. Even the basics, in trading terms, can be really difficult to understand.
When you’re looking for a platform, see if there are any educational resources available, whether those be guides, webinars, or even exclusive learning tools like trading simulators. But remember quality over quantity. It’s no good picking a platform with a huge library of guides if they’re poorly written because odds are you’ll end up even more confused.
2. Choose one with transparent, reasonable trading costs
You’ll always have to pay to trade but costs can vary significantly between providers. Some will charge a monthly or annual fee while inactivity fees and extra charges for research or data are also common. Others will charge you per transaction depending on the way you’re trading. For example, one of the most popular methods is spread trading, where the cost to trade depends on the spread (the difference between the buy and sell price). If this is how you’re trading, you need to decide whether you want fixed or variable spreads — fixed spreads stay the same while variable ones can become wider or narrower depending on market conditions while the trade is open.
As well as finding out how much you’re paying, you also have to find out what you’re paying for. Some providers are very cryptic about their charges and may even bury hidden fees within the terms and conditions. Make sure you research potential platforms thoroughly and don’t be afraid to ask questions if their pricing is vague.
3. Choose one that’s user-friendly
It goes without saying, but the platform needs to be easy to use. The best interfaces will be streamlined and intuitive — not overstuffed with as many buttons and features as possible. Less is more when it comes to design and clear navigation is essential for a positive experience. Many providers offer practice accounts that allow you to try out the platform without depositing any money. Definitely make use of this option because you’ll only know whether a platform is right for you once you’ve used it.
4. Choose one that’s regulated
Never choose a trading platform that can’t provide proof that it’s regulated in the relevant jurisdiction. Examples of regulatory bodies include the National Futures Association (NFA) in the USA, the Financial Conduct Authority (FCA) in the UK, and the Australian Securities and Investments Commission (ASIC) in Australia. You can find a full list of global regulators here.
If a trading platform isn’t being regulated, that means there’s no guarantee that it’s meeting the strict standards these organisations set to protect consumers. Becoming a customer anyway would be taking a huge risk with your money.
5. Choose one with features you’ll actually use
Most trading platforms will offer the same basic features like, for example, charts providing technical indicators. However, some will try and win you over by offering ‘free’ extras. Don’t be tempted just because it sounds like a deal too good to pass up. First of all, these add-ons will never be truly free as you’ll be paying for them somewhere within your trading charges. And secondly, you don’t want this to be what pulls you towards a certain provider if it’s a feature you’ll probably hardly use.
Something like access to regulated trading signals can be hugely beneficial, but gaining highly sophisticated data and analysis tools might be a waste depending on your trading experience and strategy. At worst, features like these could complicate your trading experience. So, think carefully about whether these extras will actually benefit you before signing up.