Ultimate Broker Guide – How to Trade Online

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Ultimate Trading Brokers Guide

Ultimate Broker Guide – How to Trade Online

The ultimate broker guide will tackle the key concepts and features you need to look for when choosing your favorite online trading broker. In this article, you’ll learn about forex brokers, options brokers, how to pick a broker, and much more. You’ll learn everything you need to know about the stockbroker industry and what to look for comparing options. We’re also going to give you a list of the top brokers for all markets, to make your job will be easier.

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If you want to get involved in the financial markets, be it the stock market or the Forex market or maybe you want to trade options, you will need an online broker to give you access to the markets. You’ll be the boss and you’ll be the one giving instructions to the broker on what to buy and sell for you.

As a novice trader, it can be quite terrifying to choose the right trading broker. When picking up a trading broker we need to make sure that we find the good guys from amongst all of the bad boys out there. The first step you need to take is to educate yourself on how to find top trading brokers.

And, our ultimate broker guide is here to help you out through this journey.

Top Trading Brokers – How to Choose a Broker

Choosing A Broker

The first question you need to answer is what products or financial instruments you want to trade? Stocks, Forex Currencies, Options, Commodities, or Futures?

Even if you want to trade a mix of financial instruments, there are online trading brokers out there that can satisfy all your needs. You just need to dedicate a little bit of your time and do some research to find the top trading brokers.

The second most important thing you need to look out for is for your favorite trading broker to have the proper regulation. If you want capital protection and assurance then you need to check if your broker is licensed by a governmental regulatory body.

Your broker can be regulated by a shady jurisdiction, which we recommend avoiding. Or, they can be regulated by big financial institutions which have bigger resources and strict financial requirements like the UK FCA (Financial Conduct Authority) or the USA NFA (National Futures Association), and CFTC (Commodity Futures Trading Commission). These regulatory bodies are more trustworthy and their umbrella of regulation has also more integrity.

Last but not least, you should look for a reliable speed execution. Trading in fast-moving markets such as the Forex market means that you want to be able to enter and exit the market quickly. Any delays can either cause you to miss a good trading opportunity or even worse, it can make your losing position even bigger if you can’t exit your trades instantly.

What is a Forex Broker?

A Forex broker is a financial service that gives individuals like us access to the markets. It’s an intermediary or a middleman between you, the trader, and the foreign exchange market that facilitates your trades. This applies to both buy and sell orders. Usually, they are licensed and regulated by national regulatory bodies.

A Forex broker will charge their clients a commission or fees or a spread – fixed and variable spreads. Depending on the type of your broker they can charge you a combination of commission and spread. This should be considered to be just the cost of doing business in facilitating your traders. It’s important to note that different brokers have different levels of engagement with their customers.

Different Types of Forex Brokers

In the Forex industry, there are two different types of Forex brokers:

  1. Dealing Desk (DD) brokers or Market Makers (MM).
  2. No Dealing Desk Brokers (No-DD).

These two types of forex brokers can be further divided into three separate categories:

  • ECN (Electronic Communication Networks)
  • ECN + STP (Straight Through Processing)
  • DMA (Direct Market Access)

The ECN and STP broker is transacting your trades directly into the market or with their liquidity providers. On the other hand, some brokers are going to make their money by taking the opposite side of your trades – dealing desk brokers. These types of brokers are trading against their clients. With desk brokers, there’s usually a conflict of interest because when you win they lose and when you lose they win.

Guess who is going to lose more often? The house always wins.

A dealing desk broker will be holding your trades on something called the B book. Desk brokers are typically managing their trades internally usually through a dealing desk. Generally, when a broker is using a B booking approach, they’ll implement all sorts of internal controls to manage their risk. This typically involves hedging positions, making sure their volumes are balanced, and things like that. They do this to reduce the risk of losing money.

When a trader starts becoming consistently profitable or starts trading really large volume this presents a bit of a problem for a dealing desk broker. And in this situation, they run a different book called the “A book”. An A book is where they place the profitable traders so they can either hedge the whole A book or simply send the order coming from the A book directly to the Interbank market.

In a DMA environment, multiple banks will feed quoted prices to the DMA broker. The DMA broker will aggregate these quotes and select the best available bid and ask price, which means you’ll have the best available spread. In other words, the client will be sending his orders directly to the Interbank market and you’ll be having complete transparency on who is on the other side of your trade.

How to Choose a Forex Broker

When choosing a broker, it’s important to find a company that is regulated by the bigger financial institutions. These types of forex brokers tend to have more resources and strict financial requirements like the UK FCA (Financial Conduct Authority) or the USA NFA (National Futures Association) and CFTC (Commodity Futures Trading Commission). These brokers are more trustworthy and their umbrella of regulation has also more integrity.

Understanding the business model of your Forex broker is the next thing you should look for when choosing a Forex broker. This is really important, especially if you’re going to be trading large amounts of money. In general, you want to choose brokers that are not going to trade against your position. In other words, you must avoid dealing with desk brokers and chose a non-dealing desk broker.

A non-dealing desk broker has a vested interest in you doing well because the more you’re trading the more money they’re making from commissions. So, they are on your side in this situation. You can learn more about forex broker income levels here.

Another criteria for a good Forex broker is the one broker regulated by a jurisdiction that offers some kind of deposit insurance. So, in the case your Forex broker goes out of business you at least can get your money back.

Last but not least, you should look for a reliable speed execution. Trading in fast-moving markets such as the Forex market means that you want to be able to enter and exit the market quickly. Any delays can either cause you to miss a good trading opportunity or even worse, it can make your losing position even bigger if you can’t exit your trades instantly.

Forex Broker Types

Top Forex Trading Brokers

Let’s start the ultimate broker guide with the top Forex trading brokers. We used the guidelines presented in the previous section to pick our top 3 Forex brokers. We can’t stress enough the importance of doing your own due diligence, as we can’t guarantee we have factored in all the pros and cons. If you are looking for a more comprehensive comparison, we recommend Compareforexbrokers.com’s best forex broker page.

In the Forex landscape, there are some brokers that make their money by trading against their clients. Basically, they are taking the other side of your trade. When that happens there’s a conflict of interest as they make money when you lose and when you win they lose.

There is a saying “The house always wins,” so make sure you do your own due diligence when choosing a Forex broker. If you pick a bad Forex trading broker, you can have liquidity issues, slippages, and delays in transacting trades.

Forex Broker #1: Forex.com

Best Brokers For All Markets

Forex.com is the largest US Forex broker with the highest number of retail traders and daily trading volume. They are based in New York and offer their service to both institutional and retail clients. The individual trader can get support not only through email and live chat but also through phone calls that are open around the clock.

If you’re a novice trader they have a basic course that is pretty in-depth and it will teach you different things about the FX market. You can open an account with them with a minimum of $250 and use a leverage of 1:50.

Forex Broker #2: Oanda

Top Trading Brokers

Oanda is the second choice you have as a US Forex trader. Oanda is a Forex broker that’s a pioneer in online Forex trading. It has been around for several years since 1996 and it has offices around the world. Oanda is also highly regulated by the NFA and CFTC.

Unlike other online Forex trading brokers, Oanda doesn’t have any minimum deposit or minimum position size. You can trade through Oanda a wide variety of instruments like currencies, metals, commodity CFDs, stock CFDs, etc.

Next, we’re going to discuss what your top options are when it comes to stock trading brokers. Be sure to check out our latest guide on Swing Trading Options here.

See below:

Top Stock Trading Brokers

The US is the top place for stockbrokers. We’re going to outline the best online stock brokers that offer the most value for your portfolio.

Stock Trading Broker #1: TD Ameritrade

Ultimate Broker Guide

TD Ameritrade is one of the best choices for online stock trading. TD Ameritrade is suitable for long-term trading as well as for day trading stocks. We had personal experience with TD Ameritrade and they are fairly good. Since there is no such thing as a perfect broker, they are trying to improve their trading platform and make it quicker.

The TD Ameritrade platform is not that intuitive so you’ll need some time before you can get used to it. They need to simplify their trading stock platform to attract newbie traders.

Stock Trading Broker #2: Interactive Brokers

Top Trading Brokers

Interactive brokers are listed on IEX and it’s highly rated by its clients solely because of the quality of its services. It has competitive low fees and offers its clients direct market access to not only stocks, but also options, futures, fixed income, Forex, ETFs trading, and other financial instruments.

Interactive Brokers have also been in business since 1977, offering institutional solutions for professional traders. Their flagship trading platform TWS is designed for active traders and includes all the trading tools you need to successfully trade the markets.

Let’s now see what choices you have when it comes to online options trading.

See below:

Top Options Trading Broker

If you’re looking to trade options, it’s mandatory to choose a Broker that caters to options trading. Options trading brokers have specific capabilities. Here we’re going to outline the top trading brokers for options trading.

Options Trading Broker #1: E*TRADE

Ultimate Broker Review

Overall, ETrade is among the best options trading brokers in 2018. Options trading has become extremely popular in the past decade and as a retail trader, ETrade is among the top trading brokers you can pick. ETrade was founded in 1982, so it’s a well-established company with strong financial numbers.

You can find a ton of reviews about E*TRADE on the internet. But, here is what you really need to know about them.

Etrade has some of the best options-based trading tools available on the market. You have complex order types that will help you implement the most advanced options strategies. The bottom line is that Etrade offers you great options tools but you need to know how to use them.

Options Trading Broker #2: Charles Schwab

Top Options Brokers

Charles Schwab is another established brand that has unique features and functionalities. The options base fee is around $4.95, which is one of the lowest fees you can find in this business. Charles Schwab also comes with high-quality researches and various services that can help you better understand the options space.

The minimum investment requirement is low, so it’s more accessible for the retail options trader. Besides the basic web-based platform, you can also have the option to opt for the other two robust trading platforms that they offer.

Conclusion – Best Brokers for all Markets

The ultimate broker guide provides you with objective and independent research to help people better understand what the best brokers for all markets are. We spent over 10 hours reviewing the top trading brokers before selecting the best for our trading community.

As a general rule, you should never leave all your money and your savings in your trading account. Only the amount that you need to trade. Nothing in life is guaranteed and no matter what level of protection you get, and how secure is your broker, bad things still can happen.

If you have any specific broker in mind and you just want a second opinion on them please leave a comment below. One of the TSG team members will try to give his subjective opinion. In the end, it should be your own decision.

Thank you for reading!

Don’t forget to read the beginner’s guide – What is The Best Trading Strategy To Earn A Living?

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Broker Guide How To Trade Online

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Disclaimer: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. No information or opinion contained on this site should be taken as a solicitation or offer to buy or sell any currency, equity or other financial instruments or services. Past performance is no indication or guarantee of future performance.