How to choose the right Trading Platform ?
A common question which any beginner investor asks is how to invest and which trading platform to use. Most of beginners prefer their own bank’s trading platform – simple reason is it often gets easily integrated into bank account and it is easy to move around money within trading accounts and bank account. Lets take example of TD bank of Canada. Being a beginner you always want to play safe and may ask your banker that you want to trade using bank’s platform. There is generally a separate department within bank to help opening a trading account.
Technical Analysis and Graphs
In today’s world where everything is handled through electronic channels and alot depends on electronic analysis and prediction models you need to check if the platform has advanced analysis, graphs capabilities and also suggest market predictions considering past history and news. We do not have much time and knowledge to do detailed analysis and keep glued to CNBC and other market news channels. This is especially important for new comers. Do not think that you are a beginner or small investor and don’t need to see analysis
1. Fee structure and brokerage charged for trading
Most of banks charge around $9.99 as of today for each transaction either you buy a single share or hundreds of them. Some other platforms may charge less than $5. In case of ETFs, of the trading platforms charge minimal amount or do not charge any trading fee
2. Minimum amount
Check the minimum amount required to hold in the trading account. If you are a beginner, you may not want to invest much so be careful not to loose money in fee.
3. Mobile application
I also check the availability of app in my mobile. This is important as sometimes during my train transit to office I check stock news and directly buy or sell stocks while travelling. Convenience and timing both are important, you will not carry laptop always with you unless you are into trading business.
4. Currency conversion
I would also check for trading facilities for registered accounts like RESP, RRSP, TFSA. Some of the platforms take care of currency conversion automatically e.g. if you are in Canada and buy Apple stock in USD in TFSA or RRSP, the trading platform uses your Canadian dollar conversion automatically. In many banking trading platforms you need to first convert Canadian to USD and only then you can buy stocks in USD. This may sound basic but when you see prices fall and you want to buy and right currency is not available you will feel frustrated.
5. Transfer of funds
I also check about options of funding the trading account. How fast I can fund and using which methods e.g. online bank transfer, Interact, etc. and also remember to check the fee or policy to withdraw the money back to banking account from trading account.
Note: Additional Tip, please check the tutorial videos of the trading platform and also check demo account and spend some time to practice. It is your hard earned money and do not start betting it out. Spend some time to understand at least the basics. Then make a decision on choosing a platform as per your need. You may need faster liquidation of money for which you may prefer a platform linked to bank or you may want to pay less commission for which you may prefer other online platforms or you may want a mix of both ! Remember there is no set formula that one product is good for all.