Selecting Your Broker

At this point you should have a fully tested system ready to trade. The last piece in the puzzle is to select your broker. Most markets require that all traders must place their trades through a broker. Fortunately this choice is easy… there really are only 2 types of brokers: the full service broker and the discount broker.

A full service broker offers advice to their clients for which a premium is charged. Given previous discussions on the importance of decision-making, you should recognize this service as being unnecessary. If you are following your trading system, such advice will only serve to confuse your decision-making processes.

Then there is discount brokers… these firms allow you to make all the decisions about how to trade your account. You only need to call, place an order and the firm will execute it. Discount brokers’ do not offer advice to their clients; hence there is no need for them to employ research staff. This reduces their overheads and makes it possible to offer discounted rates.

How do you spot a “good” broker?

First off, the key word is “good.” In this case, it means good for you, your trading style, your personality, and your needs. I recommend that my clients open an account with an online discount broker. That said, the brokers you will ultimate choose will vary depending on where you live and what market you decide to trade in.

Here are some questions you should consider when choosing your broker:

1. What are the real commission rates?

Advertised rates for companies vary between $0 to $40 per trade; the average rate is around $20. However, look closely at what the company's advertised rate really applies to. In the majority of cases there will be higher brokerage for limit orders, options and those using a 'live' broker on the phone. You may find that the advertised commission rate may hardly ever apply to the types of trade you do.

2. Are there any extra fees?

Many companies charge extra 'hidden' fees which can add significant costs to each trade. Charges to be aware of include those for transferring funds (both in and out of your account), insurance, administration charges, late payment penalties and more. You really need to look at the company's fine print or e-mail them for more details.

3. Can you trade multiple markets, and are the commissions the same?

As your trading progresses, and you decide to experiment with new markets, it’s easier to stick with the broker you have come to know and trust. Therefore, you really should plan ahead and choose a broker than can service your needs as you grow.

4. Does it cost extra to make a trade by phone?

In addition to other charges most firms have higher rates if you want to place a trade over the phone, using a 'live' broker. You may be forced to use this if their connection is unreliable, so be sure to chose wisely.

5. Will they pay you interest on the balance of uninvested cash in your account?

Some pay in the range of 3-4%. A nice little bonus!

6. Do you need to start with a large deposit?

Beware high minimum balances required to open an account. While some companies have good rates, you may need $10,000 to start. It’s a lot of money to 'punt' on a company you haven't tried before.

7. How reliable is service?

Speed and reliability of online trading is a major problem. I know of one client with a major online discount broker who watched as his account dropped by $50,000 because a system fault at their end meant he couldn't log on for a whole morning! You must know about the quality of service of the broker before you start - speed and reliability of access, their software, and so on or it will cost you money at some point.

If you’re still not sure where to start when choosing a broker, I have setup a search engine designed specifically to help you find one.

Click Here to go to Broker Search - The Worlds 1st Broker Search Engine.

Here’s how it works, simply enter "discount broker" followed by your market and then click search. For example, for a commodities broker enter "discount broker commodities" and then click search.

Once the results come up, select from the best brokers worldwide. It’s that easy!

You may have to do some research here, but once you have found an appropriate broker, open an account and then you can start trading. In the space below write down which broker you will use:

Let’s get your broker right.

MUST DO ACTION STEPS: Find and open an account with an online discount broker. Click Here to visit Broker Search. Begin trading your newly designed system and remember to follow it flawlessly.