So, if you decided to try your hand at trading on the exchange, the first
step is to choose a broker. We would like to tell you how to choose the right
company from a wide range of current offers, what to look for, and what are the
aspects of work of each organization.
Why do You Need a Broker?
The law says that individuals do not have direct access to the exchange. Only legal entities with a brokerage license — brokers or banks — can engage in asset trading. They provide their services, acting as intermediaries in transactions and securities trading.
In addition to the main activity, brokerage companies are also engaged in related work: they draw up reports on the movement of funds, provide additional services, for example, consultations on the most profitable transactions. A complete list of basic and additional services is usually indicated on the broker's website.
How to Choose a Broker
After answering a question why do you need a broker, let’s proceed to the choice of a brokerage company. To do this, it is enough to consider several basic aspects.
Reliability of a Broker
Brokerage activity is strictly controlled by the state and in case of violations, the broker can either suspend its activities or lose its license. By the way, a valid license is the first thing you should pay attention to. Usually you can find a scanned copy of a license on the company's website in the section with documents.
Also pay attention to the Disclosure or similar section, where companies publish up-to-date data on operations, cases of suspension of a license, financial risks and more.
Markets and Exchanges
It's an easy point. The vast majority of domestic companies operates exclusively on the Russian market and the related exchanges — MICEX, RTS, SPVB and others. They can trade securities of Russian companies, currencies and other assets.
Some brokers offer access to global exchanges, which are considered to be more profitable. They offer shares of the world's largest companies, including Google, Facebook, Apple and others.
In addition to the available exchanges, you can also pay attention to the available trading platforms — software to work with the exchanges. There are a great number of trading platforms, and each of them offers certain advantages. As a novice trader, you should be interested in one feature — the availability of a version for your operating system. For example, you can install a mobile application to trade on the exchange from a smartphone when there is no access to a PC or laptop.
Plans and Fees
Any broker makes money on commissions, so it is better to pay attention to this point. This may be a fixed percentage of each trading operation or a monthly fee. The size of the commission usually depends on the selected plan and is indicated in its description on the company's website or in public documents. When you use different approaches to trading (regular stock trading/purchase and storage of a large portfolio of shares), you should choose the appropriate plan.
Deposit and Withdrawal of Funds
The next important thing to consider before deciding on a broker is the convenience of depositing and withdrawing funds from a trading account.
Usually, payment systems are used for this purpose, as well as bank transfers.
Payment systems also charge fees. This is usually a fixed percentage with a minimum amount. In some cases, free of charge deposit and withdrawal are possible — it all depends on partnerships and the terms of cooperation of the broker and the payment system it uses.
And the last thing that a beginner should pay attention to is an opportunity to open a separate demo account with the broker. It will be extremely useful at first, as it will allow you to get comfortable on the stock exchange and make the first purchase of shares without risk for real funds. In our previous post, we have already told about how a demo account works and why it can be useful.
These simple recommendations are enough to choose a reliable broker and begin exchange trading.