The Consumers Guide To Choosing A Stock & Options Broker
Have you ever been confused about which is the best stock or stock options broker to use? How can you tell?
This guide is aimed to help you make a more informed decision as to which stock broker may be the best stock broker for your very specific needs.
In this guide you will discover;
- How to spot 4 unnecessary stock broker fees
- 3 costly misconceptions about your stock broker
- 7 deadly dangers of making the wrong choice of stock broker
- The #1 fee’s hack that will save you “literally” thousands in fees every year.
How to spot 4 unnecessary stock broker fees
1 – The base fee in the cost per share, cost per lot, per contract etc. (depending on what you trade)
There are some exceptionally high per share/lot/contract pricing from stock brokers and unless your picking up the phone and getting a concierge type service from where you would expect to pay a premium for the human interaction then you most certainly do not want to pay any more than you need to.
Sensible pricing will vary from broker to broker and country to country but given the technological advances and the fact that you are most often “pushing the buttons” yourself then a rough guide to acceptable pricing would be;
- For share trading pricing should range from fractions of a penny per share to a penny per share.
- For futures contracts pricing should be below $1.50 in and out.
- For options contracts pricing should be below $1.50 in and out.
There most definitely should not be a “ticket charge”
2 – Ticket charges. This is commonly seen on stock options as many stock options brokers at a “ticket charge” which is an extra flat fee ranging from $5 to $25 on every position placed.
Ive never seen a satisfactory reason why this fee is charged by stock brokers in todays world of DIY button pushing on stock trading.
3 – Artificially wide Spreads. I see this a lot on the Forex markets. As there is often no commissions or at least direct commissions, the spread is made artificially wide to make up the difference. This is most definitely one of the biggest ways that a broker can skim your account with hidden costs of business when trading Forex or via “other” trading vehicles like spreadbetting or CFD’s
Widening spreads and erroneous order delays and requotes… oh my!
The good news is that you will not see this in a regulated market and your stock broker will not be “messing with you” on the market prices.
4 – Inactivity fees. Decide to take a break and watch your broker “skim” a little of the top every month.
This is another ridiculous and unnecessary charge. Which makes sense as a deterrent for people opening account to get free access to otherwise premium charting and data packages because the broker is footing the bill for that.
However, if you have good standing with your broker and you do decide to take a break they should not be skimming your account.
In my case I use alternative charting and data sources so I really dont need that as an extra service from my broker. I just want the execution facilities and a reasonably intuitive platform to do it on.
Whatever your situation, speak to your broker about this. Often they will put a halt on such fees should you “take a break”
3 costly misconceptions about your stock broker
1 – They are financial experts. In most cases, they are not. A stock broker in the most literal sense is the facilitator between your buying and selling with the stock market.
Some of those individuals will be able and qualified to give financial advice, at least from a legal perspective.
Does that also mean that they are practically qualified to dispense that same advice.
Does the 22 year old recently graduated and legally qualified individually have the ability or track record to dispense advice?
Legally yes, practically… you decide!
2 – They have your best interest at heart. I dont even know where to start or finish with this one misconception. They want your business. Period.
I can’t recall the last time I actually spoke to any one at my brokerage in the last 18 years. As I type this I did recently change brokerages and I fired off a quick email which received a quick reply and in two days I was open, funded and placing trades.
Beyond that, I dont think that they care one way or the other who I am or what Im doing so long as I keep hitting “send order” periodically for them to be happy.
In return for the regular commissions they charge I get what I consider is an awesome execution platform which is fast and reliable as well as intuitive to use and has a visually stunning GUI.
If that is having my best interests at heart, then yes they are doing what they are supposed to be doing and expected to do.
3 – BIG name doesn’t mean BIG value. This one grinds my axe!
Just because they are a big brand name stock broker, doesn’t mean you are getting a better deal.
In my experience these are often the worse offending stock brokers because they are the big name with the big advertising budget and the household name.
7 deadly dangers of making the wrong choice of stock broker
7 deadly dangers sounded a much better headline but the reality is that there are dozens of dangers to making the wrong choice as has been outlined already in this guide.
One of the most stupid reasons for choosing a stock broker is choosing one by country of origin.
Being patriotic wont get you help you find a better stock broker.
Personally, I live in the UK and when I speak to traders and aspiring traders alike and inevitably I get asked the “which stock broker” question which is usually followed by the comment “I want one based in the UK” [or insert country of origin]
Reasoning that it will likely be less hassle to “get set up” or keep their funds in a local currency.
Having just recently opened a new stock broker account at the time I write this, I can most certainly attest to working with a slick and professional operation.
My account was opening in just a few days all online. The funding also took just a few days. In less than 1 week I had opened an account and sent my funds half way around the world without having to actually speak to anyone. For me that is a good result!
Compare this to the reports of the same aspiring traders who be patriotic and typically going with the “household name” broker (mentioned above) a good speed would be 4 to 6 weeks to “do the paper work” then you have to send your funds 3-5 days if you are lucky and 110-12 days if you are not so lucky (assuming there are are no problems).
I want the best stock broker I can find for my needs. I will go anywhere in the world for that service. In todays modern digital world there is zero excuse to find the best and use the best stock broke you can find, you should to.
The #1 fee’s hack that will save you “literally” thousands in fees every year.
What most people don’t know is that any half decent stock broker will be be open to negotiation on transaction fees.
Just let that sink in for a moment.
Your prospective or current broker will negotiate.
Just having the ridiculous AND often unnecessary ticket charge removed on your stock options trades will save you thousands.
In my own stock options trading for example, I typically trade on average 30 times per month. Which is 384 times per year.
Having a $15 ticket charge removed will save me $5,760
Before Ive even negotiated a reduced rate on my per contract fee my break even point is dramatically reduced and Im saving, well exactly $5,760 (likely more)
The best thing you can do right now is pick up the phone and call your broker. The really funny thing is that if you ask your existing stock broker, they will likely be very accommodating with very little resistance.
You can thank me with a coffee when we meet. 😃
This is an educational service provided by Mr Phil Newton https://antivestor.com