Types of Brokers, Which Broker is Best for You?

When you first decide to try trading, you may be confused by the number of offers to open an account that you get. From time to time, practically all of the forex brokers and dealers will run "specials", sometimes in matching funds, or reduced fees, or gifts and other incentives. But more importantly than that, you need to research the type of broker, and then see how well they match your requirements.

The "old-fashioned" way of buying stocks and shares was to pick up the telephone and call a "full-service broker". This is the way your father did it, or perhaps his father. It's more inefficient than other ways, and also more costly in terms of commissions, and really not recommended for someone who has taken the steps to learn about trading for themselves.

The most common way for traders to get connected to the markets is to use an online broker, such as "E*trade" or "Scottrade". You place your orders over the Internet, and receive confirmation almost immediately. This is a very cost-effective way of trading. When you are researching which one to choose, make sure that the ones you're considering includes the following features:

• Access to real-time quotes. Most now have it, but some used to give "delayed quotes" which were 15 or 20 min. out of date and could seriously affect your trading
• An accessible website that is easy to navigate, and that loads quickly as you move from screen to screen
• Trading tools that are clear and easy to use. For instance, make sure the buy and sell buttons, if that is the way their software works, are sufficiently far apart that you will not get them confused when rushing to close the position
• Make sure that you have other ways of contacting your broker if something breaks down. This is typically by telephone, but you need to know that they answer their phones within a reasonable amount of time
• A reasonable minimum account size.

If you have trading friends, you can also get recommendations from them, but you should be wary of any online recommendations or criticism. It's not unknown for brokers to arrange for favorable reviews to be posted, and it only takes one disgruntled client of thousands, who perhaps lost through his own fault, to make a lot of noise against a broker.

If you are day trading, as opposed to swing or short-term trading, you may also look into getting a direct access broker account. This should give you access to what is called "level II" quote screens, which shows you the actual action in the market, with the pending bid and ask orders on each side of the screen. This display changes rapidly as orders are fulfilled, but adds a dimension to your knowledge of how the market is reacting. The possible downside with this type of account is they may require a higher minimum balance, a certain number of trades a month, and/or a monthly fee, but it is worth exploring if you want the best of information.

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