5 Hacks for New Traders to Keep Costs Low

By  //  September 9, 2022

Share on Facebook Share on Twitter Share on LinkedIn Share on Delicious Digg This Stumble This

Want to keep your trading costs rock-bottom low? If so, there’s good news. The world’s top brokerage service providers offer new account holders the chance to get into the markets for next to nothing. Of course, there are account minimums and assorted costs associated with buying and selling, but for the most part, the 2020s are the ideal time to get started as an online investor or trader without spending much at all.

What’s the secret? There isn’t one, except that it’s necessary to shop for the best deals. Not all brokerage firms feature the same deposit minimums, commissions, fees, or transaction costs. So, it’s particularly critical for newcomers to shop around and make careful head-to-head comparisons among their favorite brokers.

Choosing a brokerage company is a bit like selecting a realtor when shopping for a house. It makes sense to work with service providers who operate within regulated legal environments, has low commissions, offer some form of deposit protection, is experienced, and offer the features you’re most interested in.

The following hacks are a great way to get started on the right foot when selecting a brokerage that’s ideal for your needs.

Work Only with Regulated Brokers

If you were house hunting, would you choose a real estate agent that did not hold a license? The same principle applies in the financial industry, which is why it is imperative to limit your short list of brokers to those who are licensed and regulated by local and national authorities. This step is actually quite simple if you know where to look for the information.

Every firm’s website lists the pertinent regulatory authorities, legal guarantees, and licenses somewhere on its site, usually in one of the last tabs or at the bottom of the main page. Don’t even bother placing your capital into an account of a company that is not regulated. It’s too risky, and many such companies disappear without notice.

Shop for Low Transaction Commissions

Trading enthusiasts seek profits, and commissions make that quest a bit tougher. When you explore a forex trading website like Friedberg Direct, you’ll notice that there are no commissions.

That’s because the company, and a few others, make their money on the bid ask spreads instead of from client commissions. A no commission or low commission structure is generally a very good situation for account holders. By keeping transaction costs low, there’s a greater chance of earning a higher profit on account balances if you make wise trades over the long haul.

Find a Broker with Minimal Deposit Requirements

Deposit requirements run from minimal to quite high. Always check on the main provider websites to see what new account holders must deposit to open. Avoid companies that want large sums of money. In fact, the industry is changing in this regard. Because so many of the top brokerage firms now feature minimal opening balance amounts, it’s getting easier to find a reputable, experienced broker that has low minimums. Withdrawal fees are closely related to the deposit requirement factor.

Always find out what the charges are for taking money out of an account. Note that some firms charge very high fees for doing so, while others make the process exceedingly simple and inexpensive. Consumers who want low costs should read the fine print on websites to learn the precise fees for withdrawing money.

Opt for Deposit Protection

Only about half of all financial services companies offer deposit protection. By law, some kinds of banks and savings institutions must protect customer balances via insurance up to a certain amount. However, in the brokerage industry, there’s no universal regulation about this kind of protection. Be sure to choose a company that has it. Otherwise, you risk losing your entire capital account if a firm goes out of business or suffers other extraordinary losses.

Look at deposit protection as a kind of insurance. How does it lower your cost of doing business? While it does not directly impact a client’s daily costs, it does have a huge effect on long-term financial solvency. If you have zero risk of losing your funds, then the overall cost of trading becomes much lower. Plus, there’s the peace of mind that comes with an insured account.

Use a Rules-Based Trading Plan

New traders who employ a rules-based plan for buying and selling tend to have lower costs overall. That’s primarily because rules help prevent over trading, which is the securities business’s version of impulse shopping. Make a detailed but simple plan for your day-to-day operations, and stick to it. Then, you’ll be less inclined to spend money on positions that are not likely to produce a profit.