Questions To Get Resolved Before Signing With The Cheapest Online Stock Trading Brokerage Firm You Find
If you want open an online trading account with a particular firm simply because it is advertised to be the cheapest online stock trading brokerage firm you can find then take a moment before signing any paperwork! There are AT LEAST three immediate questions to which you need answers. Answers to these questions may show that the firm advertising the lowest commissions may actually not be the best firm for your overall profitability.
Three Questions To Ask Any Online Stock Trading Brokerage Firm
This first question to ask is: apart from the cheapest online stock trading commisssions, will you get a per-trade and compiled breakdown of all fees? Such fees may include ECN fees (and ask if you get any existing ECN rebates), monthly day trading software fees, wiring fees, and other fees not readily apparent. Before you sign the account papers, be sure that you know ALL of the fees to which you will be subject. Compare those fees against what you will be charged by other online stock trading firms.
The second question to ask is: will you get any sort of training or other educational support? Some online stock trading firms allow you to listen to live market calls, others allow you to communicate on a private chat room, and other online brokerage firms may provide you with day trading training materials such as DVD's or an online trading training video series. Make sure that continuing education is something that is encouraged by the firm since the markets change so rapidly.
The third question to ask is: Does the online stock trading firm offer risk-monitoring features? Not all firms offer this, but most successful traders will tell you that their violations of money management and trading outside of their pre-determined rules have hurt their accounts significantly. A firm may not have the cheapest online stock trading commissions, but that may be offset if brokerage firm offers the ability to pre-set limits on your trading such as a maximum number of open positions, maximum number of open shares, or a maximum open loss before they notify you to reduce your risk. By having outside monitoring of your risk management you may get some reassurance due to the extra enforcement of discipline.
Imagine being a football player who has to get psyched up to play a game, yet he needs a coach to keep him in line. Trading stocks online can produce the emotion in you like that of the football player, yet most firms do not offer a "coach" to keep you disciplined. The additional risk management MAY be enough to help you with this dilemna. Remember, however, that all responsibility is yours, even if the online day trading broker provides risk-monitoring services.
You may be tempted by the lure of the cheapest online stock trading commissions. Just make sure that you are, in fact, getting the best overall deal!
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