Pick the right broker in 7 steps
When it comes to brokers, independent traders are spoiled for choice. Whilst having more options is good in theory, the process for selecting the right broker can be challenging and can have expensive consequences if you pick the wrong one. In this post, we’ve come up with a 7 bullet magic list to shield inexperienced traders from an expensive mistake!
Pick the right broker – the definitive 7 bullet list
1st: Ignore advertising. For a broker, it’s significantly cheaper to convince existing customers to re-deposit or move funds to him, than it is to source entirely new customers. A broker resorting to large scale advertising is literally screaming “my existing customers don’t like me, so I need YOU”.
2nd: Question what brokers do, as well as what they communicate. E.g. why would a broker really making existing customers rich, quick, invest time and or resources to attract you as a new customer?
3rd: Independently verify 1 sided accounts. E.g. If you were getting rich, quick, wouldn’t you speak wonders of the broker that helped you get there? What would existing customers say about such broker? Why are they NOT saying it?
4th: Don’t fall for “free”. There is no such thing as “free, value added education”, or “free, broker sponsored market commentary”. At best “free” stands for worthless. At worst, it’s potentially toxic because at the very least it destroys trust as well as wasting everyone’s time.
Oops! Looks as though our magic list ended up 3 bullets short… we’re down to good old common sense from here!
Listen to the (right) grapevine
Good traders know that NOTHING is more expensive than anything getting in the way of profits. Which is why, when provided with great execution and customer service, they’re happy to spread the word.
This is why word of mouth, however flawed (beware of fake, overly positive or negative reviews!) beats intense advertising, fancy websites and “free” goodies. Look for legitimate reviews (balanced ones that mention negatives, as well as positives), written by actual customers.
This is also why smart brokers focus on keeping existing customers happy. Sooner or later the word spreads and new traders “automatically” join existing ones, with no resources resources wasted on anything other than retaining their most precious asset: existing customers.
Source first hand experience
Compile a short-list. Compare spreads. Check regulation. If you feel like it, use whatever bullet point lists that gives you comfort ahead of an important choice.
Then, go for the real thing -form your own opinion by funding test accounts with real monies.
Ultimately it’s all a question of taste and your own personal preferences. Darwinex offers ridiculously low account minimums: to keep this cost low. It creates burdensome workload for our customer support team, but we have many valuable customers who tested us with small accounts before taking the plunge.
In doubt? Pick the right broker(s)
Experienced traders often trade with several brokers. This allows them to benchmark standards of service on an ongoing basis, and perhaps cherry-pick different execution sweet spots.
True, the right broker pick involves cost. But then again, nothing is as expensive as:
- Your attention diverted from the market
- Hard earned cash vanishing
- Re-quotes, slippage, etc.
- Time and money spent on optimising a strategy that only worked with dealers NOT hedging with the market
- Agonising without customer support in a high stress market situation
That’s it. No magical list, but common sense.
Quickly assemble a shortlist with credible independent 3rd party accounts.
Once down to the shortlist, get first hand experience. Repeat.
How about you? Any insights we’ve missed? How would YOU pick the right broker?