An investor should determine how extensive their broker’s shortlist is. This is a very important issue for active traders in equities. Only shares that are on this list can be used to shorten.
Especially for smaller companies, the list is often very short, which means that plenty of investors miss important chances to make a profit.
For Forex and CFD brokers: What is the spread?
With most Forex brokers, investors do not pay any fees and the broker earns on the spread. The spread is the difference between “bid” and “ask” prices. Currently, it can be 1-4 pips depending on the provider.
Many traders neglect this difference, but in the long run, this makes a major difference! A sample calculation: A standard Forex lot in the EUR/USD has a pip value of $10. If you make only 5 trades a day, this is about 1,000 trades per year, a difference of 3 pips means 30,000 dollars difference in your profit statement! Watching videos from Markus Heitkoetter could better explain this.
What is the minimum deposit for a trading account and what is the credit line?
Most brokers have set a minimum deposit. With new legislation in the US, the minimum stock for day trading is $25,000. Most brokers also offer their clients an action on credit (margin).
If this is too much for you, maybe CFD trades would be a better choice. The minimum deposits are also significantly lower in the Forex trade.
What are the charges per trade?
Even a savings of just $2 per trade can be a big difference for a day trader at the end of the month. Also, ask for discounts for particularly active traders. Some brokers offer a full price per trade, some of which include additional charges for the use of different order systems.
What are the additional costs?
For some brokers, there are costs for account management or re-transfers to their client’s bank. Also, some houses have an “inactivity fee” (an extra fee if the client does not perform any trades during that quarter). Also, the cost of trading on credit (margin) can vary significantly. Be sure to compare all costs incurred and do not focus on the basic charge per trade only.