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How Can Novice Traders Benefit from an Online Broker?Salem-News.com Business
Online brokers ensure regulatory confidence and other essential know-how.
(SALEM, Ore.) - It’s easier than ever to get involved with online trading. Most people start out by using an online broker to assist them in trades and help them understand the marketplace and how they can get a strategy together.
The perfect broker would depend on what exactly a novice trader is looking to get out of their trading journey.
The features that each broker offers would suit different types of trader – some will benefit those who are completely new to trading, while others may suit those who are looking to enhance their skills and go full-time with their trading.
The amount you want to spend will also have a bearing on the broker you choose. So, what features should a novice trader look for when it comes to online brokers?
Fees and PaymentsThe fees and payment options that a broker offers may be an incentive for a trader to choose them rather than going solo. All trades incur a fee. Some are based on individual trade volume as a commission and others are based on a spread.
Lower transaction costs may sway some traders, but these can often be made up further down the line with the scope of trading ability. Similarly, those who seem to charge a lot per trade could have access to information and charting tools that are worth the higher fees.
The deposit and withdrawal options are also important to consider. The minimum deposit needed varies between brokers – some charge lower and allow you to begin trading for less capital, while others need proof of higher capital before allowing you to use them and the access to their platforms.
Range of PlatformsBrokers trade on your behalf on platforms and these platforms all differ based on what exactly they offer in terms of trades – such as leverage and asset classes.
Some platforms that brokers use offer different charting tools, while others offer a news feed of trading information which could inform future trades.
Understanding the economic landscape and what might affect it going forwards is crucial in trading, so brokers with access to this information could really assist a novice trader in their journey.
Leverage TradingBrokers also allow novice traders the ability to take positions that they might not be able to take on their own. Leverage trading allows brokers to open positions that are larger than their capital. Only a percentage of this position needs to be invested.
To understand what is leverage in trading, it’s important to understand that leverage refers to the ratio between the position value and the investment needed.
Required margin refers to the percentage needed to open the position – which is why leverage trading is also often called margin trading.
Asset ClassesAsset classes are also important financial instruments when it comes to trading and can form the basis of an investment portfolio. Brokers can trade these different types of asset class.
The classes referred to are based on the characteristics each one exhibits and how they behave in a similar manner on the market.
Usually, the primary asset classes are: equities - stock and shares which carry no fixed interest; fixed income, such as bonds or pensions that don't vary like dividends do or rise with inflation; and money market instruments, such as debt securities that promise a fixed amount of money on a future date.
Brokers can also trade real estate, cryptocurrencies such as Bitcoin and Ethereum, and commodities such as gold, oil, or minerals.
While there are many brokers that have a broad remit, some specialize in a certain type of asset class or a particular type of trading. This is useful as some classes require different strategies and others suit different levels of investment.
Regulatory BodiesBrokers can help protect a trader as they usually belong to relevant regulatory bodies. Having this regulation acts as insurance for all to ensure that trades are conducted properly and that traders are receiving the best advice and treatment they can get.
Regulatory bodies ensure the sanctity of the markets and result in investor confidence to ensure that all traders have equal opportunities.
For novice traders, there are a lot of features that can benefit them from online brokers. These aren’t limited to tools and instruments that might help, but also ensure regulatory confidence and allow traders to invest in a wider range of markets than they might otherwise be able to.
Source: Salem-News.com Special Features Dept.
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