There are several factors that you should keep in mind before selecting a stockbroker for your online stock trading. These factors include stock trading commission, fast trade execution, security of your personal and financial information, provision of trader education and research tools such as graphs, ticker symbols, news flashes on the website and so on.
Assuming that all other factors remain the same, the first and foremost consideration before you open a stock trading account should be the overall cost efficiency which can result primarily from low brokerage or commissions.
A one time commission on a trade does not matter much even if it is on a high side. But if you are a regular trader and more so a day trader, a slight difference in commissions may affect your income substantially, be it on the higher or the lower side.
The total difference over a long term can increase or decrease your earnings by thousands of dollars. It is, therefore, very important for you to check the brokerage of the company which you choose as your stock brokers.
Do not ever think that the broker who charges you the low commission does not provide you a quality service. Quite possibly he does not charge you high commissions because he does not offer you needless frills.
Take the example of Wal-Mart and Saks Fifth Avenue. While the quality of the merchandise offered by both the retailing giants is usually the same, Wal-Mart charges the customers much less price than Saks Fifth Avenue on the same item. The reason why Saks Fifth Avenue charges you more is because it provides a really nice customer service, but then you have to pay through your nose.
Take again the case of Wal-Mart and a small retailer close to your home. While Wal-Mart makes bulk purchases directly from the manufacturers and suppliers, the small retailer has to purchase his merchandize from the middlemen. Obviously Wal-Mart can afford to charge less.
This applies to the brokerages too. Some brokerages can afford to ignore annual fees and other service charges from their customers precisely because they source their services on institutional basis and transfer their savings to their customers.
Or, they may be the retail arms of large institutional companies themselves. So they do not have to pay the third parties for trade executions and other technologies like Laser that provides the highest level of functionality and speed in trade executions.
In this way these broker firms can beat not only their peers but even the large firms like Merrill Lynch and Morgan Stanley in attracting customers because the later companies do not entertain smaller customers even though their trade commissions and other service charges may also be low.
Another reason why they can afford to beat their competitors may be that they purposely do not offer frills like investment advisories and other expensive manpower heavy services whose cost would naturally be transferred to customers.
They employ technologies to automate the trading processes and avoid as much of human element as possible. They reduce the costs through large volumes and pass the savings on to their customers.
Imagine the cost savings of a brokerage firm employing only 60 employees and doing as much work through automation as another company that has 1600 employees!
Intensive shopping for a stock broker may initially consume lot of time, effort and energy, but the savings in costs and commissions can be huge in the long run.
Why should you pay as high as $7.00 or more per trade when you can find a broker who charges you a measly amount of $1.50 to $ 3.00 for the same trade execution?
Why should you pay charges that are hidden from you when you open an account? Why should you pay account inactivity charges or account maintenance fees when you can find a deep
who can afford not to charge you the same?
So whether you are a small, a medium or large trader, an active trader or a long-term investor, you can find an online broker who offers numerous high technology tools and other trading services and charges the lowest commissions among the online brokers.
It is, therefore, highly recommended that you should do an intensive search on the Internet before settling for a stockbroker. You should never skip over a website of broker who is charging you very low commission on the presumption that he may possibly be a new entrant in the market and may not be able to provide you high quality service.
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