Logistics: Choosing your broker

The first step to getting off the ground with trading is finding a suitable broker. As the foremost tool in your investment bag-o-tricks, the broker is synonymous with trading.  However, the best brokers are the one’s you don’t notice (because if you do notice them, chances are something has gone horribly wrong.)

Investopedia had a good article on picking your first broker here—certainly worth the read.

Younger traders can consider alternative, low-cost brokers like Sharebuilder and BuyandHold. These brokers will let you trade for a low monthly fee or for a per trade cost of about $2. There is a catch: the trades don’t happen in real time. You have to trade within a set number of “windows” every day.  If your strategy is really short term, these guys won’t work.  However, if you are not to worried about nickling and diming the price of your shares, they do present a feasible option to someone with less than a thousand dollars to invest (you don’t want to spend 1 or 2 percent of your investment capital on every trade.)

Make sure the broker you pick is reputable, just like you would with any bank. Sometimes it can be easy to forget these people hold on to your money. On the other hand, don’t expect that because a broker charges more they are necessarily better. That kind of thinking just doesn’t follow.  

Ultimately the best broker for you depends on your strategy. As the article says, mind the commissions, margin rates and overall services they provide and you should find a broker worth signing on with.