A beginner’s trading journey begins with choosing a trading platform that suits best. An online trading platform is a tool that allows its customers to buy and sell financial products at their convenience.
So, how to decide which platform to choose among many available in India and beyond? What are the factors that make a trading platform best? Below are four tips that can help an investor make a choice.
- Fees and Charges:
There are two things to keep in mind in regards to fees; the fee that levied by brokers that one chooses and by exchanges/ counterparties of the brokers.
Each transaction that is executed on a trading platform costs some fees; these fees ultimately impact the overall return, so it is essential to keep them as low as possible. Before signing up, investors should have full clarity on how much they are being charged, and the fee structure should be easy to understand.
Charges include:
- Exchange/ counterparty fee
- Clearing/ depository fee
- Brokerage fee
The first two charges are fixed and will not depend on the trading platform, but the last component, which is the fee charged by the broker, constitutes the largest chunk of the cost associated with making a transaction. When choosing a trading platform, look for platforms that charge low commission fees.
The fee varies depending on the transaction value and market that an investor chooses to trade in. There are some trading platforms that offer free brokerage but charge high administrative charged e.g. platform fee, in active fee, custody fee, withdrawal fee, forex fees… ; one should keep this aspect in mind when comparing trading platforms for investment.
Most brokers charge percentage of transaction value (price x quantity), while others charges flat fee. If a platform which charges flat fee, then it will be cheaper to make a larger transaction value so that the commission is kept low in proportion to the invested capital.
- Access to Markets:
All trading platforms are not the same when it comes to market access; if they are looking at diversifying your portfolio and want to invest beyond the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE), like New York Stock Exchange (NYSE), NASDAQ, Japan (TSE), Australia (ASX), London (LSE), Hong Kong Exchange (HKEX)…, then they will have to specifically look for brokers that allow you to trade in the markets.
The trading platform should also offer the option to trade in multiple assets like stock, ETF, bond, unit trust, Contract For Difference (CFD).
- Educational Resources and Insights:
For beginners trading online could be overwhelming sometimes. They might want to look for an online trading platform that offers tools/ research and dealers to their customers to help them make insightful decisions about investing and buying assets, despite of paying sightly higher fee/ brokerage. They do not want to make decisions in the dark or based on hunches; analytical tools and insights are offered by trading platforms, which can help them make informed decisions.
Even those with some experience can gain from educational tools that teach about investment strategies or allow them to gain insights about trading in additional asset classes.
Also, do check if the trading platform offers free webinars and demo to their customers to familiarize them with trading tools and website usage. A demo will help in deciding whether the online platform meets your needs.
- Ease of Use and Safety:
Investors should look for a trading platform that is user friendly and easy to use. Ease of use in trading terms means that one should be able to place an order with a click and without wasting time. The tools available on the platform should be easy to use, and the website should be easy to navigate.
If one is on the move a lot, then they might want to choose brokerage with mobile platform.
Safety is a feature that cannot be ignored, especially when cybercrimes are at an all-time high. Investors do not want their data or financial information to be compromised, and for this, they need to be sure about the security features of the trading platform. Find out about the type of data encryption that they use and the firewalls both at the server and application level that have been put in place to keep the website secure.
Conclusion:
There are multiple online trading platforms, each offering unique features and advantages. The idea is to find what works best for you, depending on your trading needs. It is a good idea to go through various options and then decide based on what feels right not based on what somebody else thinks or recommends.
