Welcome to the second installment of our new blog series: The Tools of the Trade. In this short series, we will cover essential trading tools you need to have as you get started trading such as education, technology, and information. In our first blog post, which you can read here, we covered your trading education and information. Today’s blog will take your journey a step further with Brokers and Trading Capital.
Brokers
Brokers are the bridge between you and the stock market and are a mandatory part of the trading process. Broker platforms are where you will deposit your trading cash and execute your trades. However, some brokers are more welcoming to individual trading than others. But the good news is there is a diverse range of brokers available to choose from, and here are a few things to consider when searching for a broker:
- Commissions - These can vary widely. Make sure you know how much it will cost you to place a trade. In the recent years, most brokers have dropped normal stock trading fees but it is always worth your time to find out the “what” and “how much” they do charge for various types of trades.
- Hidden Fees - Brokers love to add on extra fees for platforms, administrative, position adjustments, and more. Make sure you are aware of all fees.
- Data Quality - Almost every broker will promise "live streaming data." Be sure what you are receiving is actually "Level 2 Quotes."
- Customer Service - Make sure a human being will answer the phone when you call. The last thing anyone wants is if you need help closing a trade, and all you can get is a machine on the other end of the phone line.
- Minimum Account Balance - Some brokers will require you to maintain a minimum balance on your account.
It is good to know that every broker in the United States will ask you for a social security number and financial information as required by law. Therefore, it is good to think of signing up for your broker, like signing up for a bank account. If communicating that information online makes you uncomfortable, please give them a call as it will be an excellent chance to test their customer service. Every person has to choose a broker if they wish to trade, and below is a list of brokers the majority of our TradeSmart students lean towards using.
Most of our Canadian friends tend to choose either of the following:
Trading Capital
You would be surprised by how many people complete their education, set up their broker account, and then realize that they are short the cash to fund their trading account adequately. The good news is you can fund a trading account with as little as $5,000, and even if you need to raise funds, we have a few suggestions for helping you along.
- Sell some stuff - I have yet to meet a trader who couldn't find $5,000 worth of stuff in their home or garage to sell. So, take a look around your home and see what you can sell.
- Pick up a side hustle – Find a side hustle to make a little money and use it to fund your account. Companies like Uber and DoorDash have changed the way people can make some extra cash and are easy to start doing.
- Rent your stuff - Rent your house or car out for a weekend.
- Direct Sales – Years ago, Avon used to be the king of the industry; however, today's direct sales model has entirely reinvented the industry model with exceptional products, training, and opportunity.
In Closing
Trading the stock market is a great activity and can be a financially lucrative past time. However, like any field of study or profession, you need to have the right tools in your toolkit, and this blogs series should help you start your journey into the world of trading stocks and options.
Finally, we do offer our own line of trading education and if you wish to sample our style and content, please take consider registering for our free introductory classes in the Foundations of Trading class series which you can do here.