One of the first steps one must take when setting off on this journey of trading, whether locally or internationally, involves the choosing of a broker or brokerage company. While this choice usually comes early on in the investment journey, it oftentimes can make or break your chances of getting great returns on your investments. Whether you are looking for an online trader or for a more classic human broker, finding a reputable broker that suits your needs can be very daunting. The process of researching can get quite complicated, especially when it comes to international stock traders.
But why is finding the right broker so important?
When it comes to trading, just like any other form of investment, risks are involved: more so with international trading. Additional risks such as forex risk and information asymmetry are often overlooked by inexperienced traders, who are new to the international trading market. These risks may result in reduced profit margins and imprudent investment decisions, as one may not account for losses incurred due to changing currencies and/or the state of affairs in whatever market they may have invested in. A good broker will keep you, as a customer, as well-informed as possible, so that you can maximise on your profits and minimise on your losses with every trade.
So how can you find the right broker for you?
Understand Your Needs
Knowing what kind of trader, you are (or are looking to grow into) will help filter out many of the brokers, online or otherwise, that do not fit well in your investment model. Do you want to be an active or passive trader? What is your goal as a trader? Active traders are constantly trading and always looking to make trading moves that take advantage of prevailing market conditions, while passive traders may prefer to play the long game, where they invest in certain stocks and keep them mulling over years.
Also, your goals and aims when it comes to trading may come into play when deciding what broker would be best for you. While experienced traders may be able to make investment decisions by themselves and for themselves, newer traders may prefer to make use of a broker with vast market knowledge. Such a broker may offer advice and help traders choose investment portfolios that align better with the goals they are trying to achieve through trading.
Investigate the Credibility of Potential Brokers
When it comes to searching for the best broker or brokerage for you, research is paramount. You really can never be “too careful”, in this internet age. And while there is an abundance of information on trading, this information overload is a double-edged sword, especially for inexperienced traders who do not know how to sieve the wheat from the chaff.
A good place to start when researching on a broker’s credibility is reading reviews. People often take to online forums to state their grievances concerning brokers. From hidden costs to poor customer care, it’s easy to spot red flags when it comes to disreputable brokers. You can also check for licencing and regulation on brokers. While the law may be on your side when it comes to protecting you against fraudulent brokers, prevention is better than cure. With a bit of research, you can easily avoid wasting time and energy on trying to get your money back from fraudsters.
Make Note of All the Costs You May Incur
While most reputable brokers are transparent when it comes to laying out the costs of their services, hidden costs are usually a big issue with their less trustworthy counterparts. Most amateur traders focus on low commissions when looking for brokers, making them susceptible to brokers that levy fees such as high transaction fees, management fees and even currency conversion fees to mark up their revenue. These can go a long way in cutting back on one’s returns and may even result in losses.
Other things worth considering when choosing a broker including availability of resources such as market forecasts and financial reports. These are however more tailored towards experienced traders. Also, worth considering are tools such as mobile apps for those who wish to trade on the go, and even retirement tools which can be used to benefit retired individuals.
At the end of the day, choosing broker is a task that should be undertaken with care and prudence. One must therefore be sure to do due diligence and glean whatever information they can before settling on the broker that they think would be best for them. However, if you make use of the tips above, you are sure to be well on your way to a fruitful international trading experience.