Selecting the best online stock broker that fits your needs can mean the difference between a potential new income stream and frustrating disappointment. While there’s no surefire way to guarantee investment returns, there is a way to set yourself up for success by selecting the online brokerage that best suits your needs.
In this guide, we’ll break down everything you should look for in your ideal brokerage, from the obvious (like whether or not the platform allows you to buy and trade the securities you’re interested in) to the not-so-obvious (like how easy it is to get support from an actual human when you need it).
But no matter which stockbroker you choose in the end, the search typically starts in the same place: knowing how brokerages work and your needs.
What’s a stockbroker?
If you want to buy stocks, you will almost always need a stockbroker — essentially, a middleman — to place those orders on your behalf.
To understand what stockbrokers do, it helps to have some quick background about the stock market.
Stocks are traded through market exchanges, like the New York Stock Exchange or the Nasdaq. These exchanges are like a supermarket for stocks: Companies list their stock with an exchange, and the exchange connects buyers and sellers, imposes rules and regulations, and tracks the demand for each stock, which influences the stock’s price.
But the average investor can’t just walk into an exchange and pluck a stock off the shelf. Instead, you need a stockbroker, a company that is licensed to execute trades with the exchange.
In some cases, brokers also provide advice on which stocks you should buy and sell. However, brokers should not be confused with financial planners, who tend to offer more holistic guidance on your financial situation.
How does a broker make money?
Brokers are typically compensated through a commission on each trade. Investors have historically paid a broker a commission to buy or sell a stock.
Stockbrokers that do not charge commissions make money off investor assets in other ways — most often by earning interest on uninvested cash in investor accounts. Most investment accounts hold a small amount of cash, and a broker sweeps that cash into a deposit account that earns interest. A small portion of that interest is paid to the investor, and the brokerage firm pockets the rest.
Brokers also sell trades to market makers, which earns them a small fee per trade. Investors rarely notice this, but it can in some cases slow trade execution and increase the cost of the transaction slightly. High-volume traders may wish to choose a broker that routes trade orders based on price.
What’s an online brokerage account?
A brokerage account is an investment account opened with your stockbroker and used to buy and sell securities such as stocks, bonds, mutual funds, and ETFs.
You can transfer money into and out of your account much like a bank account, but unlike banks, brokerage accounts give you access to the stock market and other investments.
You own the money and investments in your brokerage account, and you can sell investments at any time. The broker holds your account and acts as an intermediary between you and the investments you want to purchase.
There should be no fee to open a brokerage account. Having an account with an online broker means you can trade a variety of markets.
When investing with CAPEX.com you will open an Invest account that you’ll use to buy and sell stocks and other securities. You can also open a CFD trading account. Trading means speculating on asset prices without owning them, in both directions. Thus, are used for short-term positions and hedging.
» Looking for some guidance to start investing? Here's how to invest in stocks
What are your Investment Style and Goals
It’s important to know your trading and investing style when choosing a stockbroker. It’ll often depend on your personal preference and appetite for risk. Opening a demo account and using virtual funds to trade in a risk-free environment could help you find styles and strategies that work best for you.
Your preferred ones might impact the type of broker you choose, as not all online brokers offer the same products or markets. Are you a trader or a buy-and-hold investor? Traders don't hold onto stocks for a long time. They're interested in quick gains greater than the market average based on short-term price volatility, and they may make many trade executions over a short period.
If you envision yourself as a trader, you'll want to look for a stockbroker with very low execution fees, or trading fees could take a big bite out of your returns. A CFD broker may be more suitable for stock speculation. Besides trading in both directions, traders can use leverage to amplify the impact of short-term price movements.
Also, don't forget that active trading takes experience, and the combination of an inexperienced investor and frequent trading often results in negative returns.
A buy-and-hold investor, often called a passive investor, holds stocks for the long term. Buy-and-hold investors are content to let the value of their investments appreciate over longer periods of time. Many investors will find that their investing style falls somewhere between the active trader and the buy-and-hold investor, in which case other factors will become important in choosing the most appropriate stockbroker.
How to choose the best stockbroker for your needs
Competition among online brokers is fierce, which means costs are coming down and services are being ramped up. However, with so much demand for online brokers, we’re seeing more new firms enter the space, hoping to capitalize on the surge in retail investors. That can make it especially hard for investors to find a broker that's the right fit for them.
So how do you choose the right stockbroker for you? There are a lot of factors to consider, and the decision will likely come down to individual priorities. Some investors are willing to pay higher trade commissions for a state-of-the-art platform; others count costs above all else. Some may want to stick with the largest financial institutions with heavy name recognition; others may be more interested in sifting through the smaller brokers to find the perfect fit for them.
Assets, fees, platform features, and security are some key considerations.
Range of Markets
You should already have ruled out any stockbroker that don’t allow you to trade the securities you’re interested in. Make sure their platform and apps automatically allow you to trade preferred shares, IPOs, options, futures, or fixed-income securities. If you don’t see particular security on the platform, but you know that the brokerage supports it, try looking in your account settings, or doing a quick search, to see how you can activate those features and learn about permission requirements.
There are 60 major global stock exchanges that range in size and trading volume – from the New York Stock Exchange, NASDAQ, Euronext or Deutsche Boerse to tiny local exchanges.
The best stockbrokers should provide access to the top stock exchanges in the world and include in its offering a wide range of stocks and funds to choose from.
Margin and fractional investing
A good choice is to work with a stockbroker that offers a wide variety of markets to trade on, including derivatives on indices, stocks, or ETFs to speculate during falling prices and market downturns or hedge an existing portfolio.
Another top feature to look for is fractional shares, which let investors purchase stock or ETFs by the dollar amount, rather than by the number of shares. This is especially helpful for investors who don’t have much money to invest but want to build a diversified portfolio or are looking to set up a dollar-cost averaging strategy.
With CAPEX.com you can pick from over 5000 different companies and exchange-traded-funds from 10 major exchanges worldwide and hold their shares for as long as you like until you decide to sell. Additionally, there are over 2,000+ CFDs on stocks (including fractional shares of blue-cheap stocks) indices, ETFs, and other asset classes to choose from.
Regulation and Trust
There’s a wide range of stockbrokers out there. Some have been around for decades, while others are relatively new to the scene. That doesn’t mean these newcomers are untrustworthy if they’re regulated by a trustworthy authority.
Within the EU, you can look for brokers who are authorized and regulated for example by the Cyprus Securities and Exchange Commission. Today, there are many trading websites, and very often these sites have regulations that are not very rigorous, or they are not regulated at all.
CySEC is one of the stricter European authorities in regulation, and every broker under their compliance has that certification displayed at the forefront of their website.
If a stockbroker is regulated, they will state this on their website, along with the license number they hold with that regulator. This more detailed type of information will most commonly be found in the 'about us' section, as well as in the website footer. Note that there are different regulatory bodies in different regions, so a good rule of thumb is to ensure that the stockbroker you are considering is authorized and regulated by the regulator in their regions of operation.
If you are looking for the best stockbrokers online, a professional-looking website does not guarantee that the broker is a trusted one. A major advantage of a regulated stockbroker is the compensation scheme, a system that guarantees its customers' funds within a maximum limit, should the broker go bankrupt.
For example, the purpose of the Investor Compensation Fund (ICF) is to secure the claims of covered clients against the ICF members through the payment of compensation, if the necessary preconditions are fulfilled. The ICF pays compensation of up to 20,000.00 EUR to a covered client If the member is not able to return the funds to the client.
Here you can find more details about CAPEX.com regulations and the financial authorities that we are registered, authorized, and licensed.
Financial Security and Account Protection
Segregation applied to the securities industry requires that customer assets and investments that are held by a broker or other financial institution are kept separate—or segregated—from the broker or financial institution's assets. This is referred to as security segregation.
At CAPEX.com, in accordance with CySEC rules, all client money is kept fully segregated from our own assets in a regulated credit institution within the EU. This ensures that clients’ funds are available to them at all times, and cannot be used by us under any circumstances. These arrangements are checked and verified by our auditors.
Commissions and payments
Stockbrokers generally offer a similar menu of investment options: individual stocks, options, mutual funds, exchange-traded funds, and bonds.
The investments offered by the stockbroker will dictate two things: whether your investment needs will be satisfied and how much you’ll pay in commissions. Pay careful attention to the commissions associated with your preferred investments.
This is the transaction fee for entering and exiting a position. It may be a flat fee, a percentage of the transition value, or a fraction of a cent per share, for example. This can vary by market. Fees are typically in the currency in which the transaction is occurring. There are some brokers that offer commission-free investing. If you plan to invest in ETFs, you should look for one of these brokers.
Based on the account type, with CAPEX.com you can execute trades with 0 commission.
Currency conversion fees
International stocks often require a currency conversion. There is usually no direct fee for swapping currencies, but there is a spread between the buy and sell prices. For example, if you converted pounds to US dollars and then swapped it right back, you would lose a few percent even if rates remained unchanged. Therefore, the fewer currency swaps, the better.
Some brokers will also charge a fee for doing this currency conversion, anywhere between 0.5% and 1.5%. If doing a lot of trading in another currency, consider opening (if possible) a trading account funded with that currency. This way, currency conversions are avoided on all transactions in that currency in that account.
You may not be able to avoid account fees completely, but you can certainly minimize them. Most stockbrokers will charge a fee for transferring out investments or cash, or for closing your account. If you’re transferring to another stockbroker, that new company may offer to reimburse your transfer fees, at least up to a limit.
Most other fees can be sidestepped by simply choosing a broker that doesn’t charge them, or by opting out of services that cost extra. Common fees to watch out for include annual fees, inactivity fees, trading platform subscriptions, and extra charges for research or data.
Tools, Features, and Support
If you're a beginner investor, then you may have different needs when it comes to customer education and trading support. You may want access to lots of webinars and educational articles that teach the basics of investing, and you may be interested in screeners that make it easy to pick out different assets to buy.
If you're a more advanced investor, on the other hand, then you're likely more interested in the charting features, expert analysis, and in-depth company research you can access.
Think about where you're starting out -- and how much time you plan to spend devoting yourself to researching investments -- so you can find a brokerage that offers the tools and materials you're looking for.
Finding an online stockbroker that offers plenty of training materials and learning resources can definitely help you on your journey. These can include glossaries or how-to articles, fundamental analysis, portfolio diversification, how to interpret technical studies, and other beginner topics. Understanding how trading and investing work before opening any position is crucial.
If the broker syndicates work from other sites, make sure those sites are reputable. If the site has a blog or other contributor content, then make sure the contributing authors have experience and authority you can trust.
You can improve your trading knowledge and skills with CAPEX Academy. This tool offers courses for you to learn at your own pace – for free. You can then put your new skills to the test by opening a free demo trading account.
If you're a new investor and you’re feeling overwhelmed, make sure you can get in touch with the service staff quickly and easily. If you’re technically challenged, make sure the tech support team is easy to contact and available round the clock.
Not only do you want to choose an online trading broker with a good platform, but you also want them to help you timeously when you have questions. So, taking lines of communication and immediate availability into account is essential when choosing your stockbroker.
If you’re a learner trader, you can make use of the CAPEX.com client services team for a one-on-one walk-through of our platform while setting up your account. We’ve also got 9-hour live support where you can ask our trading experts for assistance. You can reach us via phone call, email, or chat.
Deposits and Withdrawals
It is also important to know how easy it is to move money in and out of your brokerage account. If you’re looking to employ a more set-it-and-forget-it strategy, being able to withdraw funds may not be as big of a concern. It’s prudent to review the deposit, withdrawal, and funds settlement terms of any brokerage you consider.
Find out if you can deposit funds via check, ACH transfer, wire, or credit card (this isn’t necessarily recommended, but it may still be an option).
Make sure you verify whether there are any fees associated with these options – though most brokerages don’t charge for deposits.
Check the available options offered by CAPEX.com in your country.
Trading Platforms and Apps
Finally, you want to make sure you are comfortable navigating the brokerage firm's stock app and/or stock trading platform to buy and sell stocks and other assets.
While any brokerage should have a decent description of what kinds of tools and resources their trading platform offers, sometimes the best way to assess platform quality is to give it a test drive. For brokers that allow you to open an account for free, it may even be worth the effort to go through the signup process just to access the trading platform if that’s what’s necessary.
Whether the brokerage has a web-based platform that anyone can access or a free downloadable platform that requires no-strings signup, do what you can to access the tools you’d use for free.
Even if you’re a more advanced trader, and there’s no free way to play around with "Pro" tools, you can get a good idea of the quality of a brokerage’s offerings just by looking at its basic suite. If there’s nothing in the standard platform that seems promising, it’s unlikely the advanced platform will be worth your time either.
On the other hand, some companies offer a huge array of tools and resources with their free products, so don’t write off stockbrokers with only one platform just yet.
The best trading platform for beginners is almost always a demo account, where you can practice trading risk-free. A demo account will help you to build your confidence as a trader with virtual funds to help you hone your skills in a risk-free environment. Once you’re satisfied with your progress and you’re ready to trade using real funds, you can open a live account.
CAPEX.com's award-winning platform has a simple and clean design, offering you seamless access to markets you want to trade. You’ll have access to interactive features, such as charts and analytics, technical analysis tools, and integrated 3rd party tools for research and insights. We also offer MT5 – a well-known third-party platform.
Now that you’ve played around with the platform a bit, take a look at the charting capabilities to explore the tools at your disposal. Pay attention to what kinds of data you can plot, how easy it is to switch between charting technical studies and reviewing economic indicators, and what you can customize and save for later reference.
Check what technical indicators are available on the chart. In general, the more the better. At the very least, you should be able to plot basic indicators like volume, RSI, moving averages, Bollinger bands, MACD, and stochastics. If any of these basic indicators are missing, it’s time to move on. Other charting tools to consider are Fibonacci retracements, Elliot Waves, trendlines and channels, and available chart types (Japanese candlesticks, Heiken Ashi, or Renko).
You should also be able to plot at least a few company events, like earnings reports, stock splits, and dividend payments.
A popular way to test out strategies and get comfortable with the process before putting cash on the line, backtesting allows you to simulate a trade based on the historical performance of your chosen security. It’s a way of placing a hypothetical, retroactive trade and then seeing what would have happened had you executed it in real life.
Is CAPEX.com the best online broker for you?
Here are some of the reasons why people choose to trade and invest with us.
We’re top online trading and investing provider
- Deal on our award-winning platform and mobile app with 5,000+ stocks and ETFs listed on 10 major stock-exchanges
- Get exposure to over 2,000 CFD markets, including shares, indices, forex cryptocurrencies, and commodities
- Access deep liquidity and enjoy fast execution on our platform, no matter which device you use
- Benefit from advanced dealing options such as points through current and partial fills that you can turn on or off on our platform
We offer trade, analytics, and education tools
- Receive telephonic support from our service desk and a one-on-one walk-through when opening an account with us
- Receive your price and indicator alerts using email or push notifications
- Use our integrated tools for market research, insights, and price consensus
- Get the latest market news and analysis from our industry experts
- Learn valuable skills for free user guides and training materials available on CAPEX Academy
How to start investing with us
- Fill in a form. You’ll be asked about your trading and investing knowledge. This’ll ensure you get the best experience on our platform, whether you choose to trade or just invest
- Get verification. We’ll usually be able to verify your identity almost immediately
- Fund your account. Deposit money into your account when you’re ready and start trading and investing.
In looking for an online stockbroker, you should consider whether they match your investing profile and cater to your objectives.
- Pay attention to the commissions and fees they charge, especially those related to the investment products that you will be using the most.
- Carefully consider the platform and technology offered by the stockbroker. Make sure the tools it offers to fit your investing style.
- Look for a broker that can assist your decision-making and development as an investor with quality research and educational materials.
- Consider how much customer support you feel comfortable having access to. Some brokers have live agents available 24/7 by chat and phone while others only offer support via email.