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Last update: Jul 08, 2024

Your Guide to the Best Online Brokers for Beginners

Choosing Wisely: Selecting the Right Broker for Your Investment

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Written by

Josep Garcia

Josep Garcia

Upcashwise Advisor

I'm Josep Garcia, originally from Barcelona. I launched my own website in 2016, focusing on personal finance, which has been live since 2018. Since then, I've continuously produced online content related to personal finances, covering topics like banking and investment products, and also creating videos on these subjects. In 2023, I decided to deepen my expertise in finance and obtained my EFPA (#37363) certification in financial advisement.

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Photo of Catherine Cooke

Edited by

Catherine Cooke

Catherine Cooke

Upcashwise Advisor

I'm Catherine, originally from London and now living in Spain. My professional journey led me from being a teacher to becoming an online entrepreneur. At Upcashwise, I assist with content creation and graphic design, two of my areas of expertise. With years of secondary school teaching experience and a Master's Degree in Teaching from UEL, I bring a strong educational background to the team.

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upcashwise.com is fully supported by its readers. If you register or buy a course using our links, we may receive a commission. This does not affect our ratings, methodology or partners.

In my twenties, I eagerly ventured into the stock market with my bank’s brokerage account, only to face high commissions and make investment errors. This experience taught me valuable lessons about timing, risk, and diversification. It also highlighted the importance of costs, like brokers’ fees, in investing.

To help beginners avoid these pitfalls, I’ve compiled a guide on top online brokers, outlining their pros, cons, and fees.

Josep Garcia, financial expert at Upcashwise.com

Why Can You Trust This Article?

I’m passionate about the finance world and have been testing the most popular brokers for years. Additionally, our unique methodology uncovers each broker’s pros and cons, thoroughly examining their costs. This is combined with our regular content updates and expert authors.

Josep GarciaFinancial Advisor

Be prepared, as this guide is extensive. But if you’re short on time and just want to get straight to the recommendations, here’s a brief summary of the best brokers for different needs:

Trading212

Best Overall

4.4

eToro

Social Investing

4.1

XTB

Stocks & ETF Investing

4.2

DEGIRO

Markets & Assets

4

Let’s get down to business and help you find the broker that best suits your investment style.

The content provided herein is for educational purposes only, it’s not financial advice. Investing carries risks, including the potential loss of capital. Past performance doesn’t guarantee future results.

Best Brokers for Beginners: An Overview

Platform

Facts

Summary

2.5 million users.

10,000 stocks.

Trading 212, popular among European investors and boasting 400,000 + users. It’s well-designed and highly intuitive, making it suitable for beginners. It offers fee-free investing in Stocks and ETFs. It doesn’t include certain assets, such as crypto or bonds and others.

  • Well-Designed and Intuitive
  • No Trading Fees for Stocks & ETFs
  • EU & UK Regulated
  • Account Currencies in USD, GBP, & EUR
  • No Social Investing Features
  • Thin Support Materials
  • No Algorithmic Investing
  • US Clients Not Accepted

32 million users

3,000 stocks

300 ETFs

eToro’s known for its user-friendly platform, offering quick account setup and access to a wide range of markets for fractional stocks and ETFs. Users can also invest in cryptocurrencies.

  • Wide Range of Markets and Asset Classes
  • Regulated in the EU, UK, and Australia
  • Social Investing (Copy Trading)
  • Flexible Demo Account
  • Commission on Withdrawals
  • Account Only in US Dollars.
  • Minimum Deposit $10

DEGIRO

4

2.5 million users

50 + Exchanges

DEGIRO, regulated in the EU and UK, is known for its user-friendly platform and extensive ETFs and shares offerings. It’s available in select European countries but not in the US, Canada, and others. Note the accumulating fees.

  • Regulated in The EU and UK
  • Many Assets Available
  • Accepted Account Currencies
  • User-Friendly Interface
  • No Demo Account
  • US Clients Not Accepted
  • Crypto Investments Not Available
  • Fees Can Add Up

800,000 + users

3,000 + stocks

150 + ETFs

 

XTB, based in Poland, offers fee-free trading in stocks and ETFs, featuring a broad range of assets with full or fractional investing. However, it has a less intuitive interface, a limited demo account, and doesn’t serve US clients.

  • Regulated in The EU and UK
  • Full & Fractional Assets
  • Trade Real Assets & Derivatives
  • USD, GBP and EUR Accounts
  • Limited Demo Account
  • Fixed Leverage
  • Inactivity Fees
  • US Customers Not Accepted

Interactive Brokers

4.1

2 million users

150 markets

Interactive Brokers, serving many countries, offers investment in diverse assets. While its global reach is a strong point, the platform can be less intuitive and somewhat difficult for beginners. The wide array of offerings, though advantageous, might also be a bit confusing to newcomers.

  • Derivative & Real Assets
  • Available Countries
  • Markets & Aseets
  • Ease-of-Use
  • Account Opening
  • Complicated Pricing Model

Plus500

4
Read review Visit Plus500

CFD Service. Your capital is at risk

330,000 + users

2,800 + CFD

Plus500, a specialized CFD broker, provides a wide range of CFD options not ideal for beginners. Be aware of its inactivity fee. Only their demo account is suitable for beginners.

  • Regulation Across UK, EU, NZ, and More
  • Well-Designed
  • Available Countries
  • Only CFD Trading
  • Fixed Leverage
  • Inactivity Fee

400,000 + users

1,500 + CFDs

AvaTrade focuses on CFD trading with fixed leverage and a selected asset range, potentially challenging for novices. The platform isn’t the easiest to navigate, although it supports multiple deposit methods. However, asset options are limited.

  • Account Opening
  • Regulated in UK, EU, Australia, etc.
  • Multiple Deposit Payment Methods
  • Not Available in the US
  • Not Many Assets
  • Exclusive to CFD Trading
  • Interface Design Could Be Improved
  • Fixed Leverage

Users not disclosed

2,250 + CFDs

IC Markets presents a steep learning curve and needs external platforms like MetaTrader or cTrader. Its investing platform is fairly outdated. While it focuses on CFD trading with fixed leverage, it also offers algorithmic trading.

  • Connect External Trading Platforms
  • CySEC Regulated
  • Algo Trading
  • Doesn't Accept US Users
  • Outdated Interface
  • Only CFD Trading
  • Security Login Options

IQ Option

3.8
Read review Visit Site

83% of investors lose money.

250+ assets

IQ Option, exclusive to derivatives, features a well-designed interface and a substantial demo account. Despite limited asset choices and fixed leverage, it offers excellent charting tools.

  • Well-Designed Interface
  • Generous Demo Account
  • Comprehensive Charting Tools
  • EU & UK Regulated
  • Exclusive Derivative Trading Platform
  • Fixed Leverage
  • US (& Other) Clients Not Permitted
  • Limited Asset Selection

What Is A Broker?

A broker, either an individual or an organization, acts as an intermediary in transactions, particularly in finance for trading assets like stocks. Yes, the midleman.

Brokers, likened to matchmakers, connect you to parties for buying or selling assets, like Apple shares. Some, like Plus500, act as market makers, trading directly with you. Brokers charge a commission or spread for their services.

Brokers and fees
Brokers and fees

Why Do I Need A Broker?

Good question!

A broker is essential for trading on the stock exchange, acting as a platform to buy or sell financial assets.

Imagine this: you get a lucky $500 tax refund and decide to invest it in shares, like Intel.

But how do you go about investing that money in Intel?

You could try knocking on doors in your neighborhood, asking if anyone owns Intel shares and wants to sell them at a fair price.

But, let’s be real, that’s not really an option.

Instead, brokers step in to connect you with fellow investors who are ready to trade (buy or sell assets) with you. Sometimes, they even handle the trading themselves.

Just like most of us don’t go directly to the farmer for potatoes, cabbages, eggs, or lettuce – think of the shopping hassle! That’s where brokers step in, acting like a supermarket for your financial needs.

The Best Online Brokers For Beginners

Discover top brokers offering insights into the current market. Remember, specialization varies; some excel in derivatives like CFDs, others in assets like shares or ETFs.

Trading 212

Trading 212 stands out as a beginner-friendly broker, renowned in the UK, France, and Germany for its easy-to-use platform that boast 2.5 million users.

Trading 212 suitable online broker for beginners
Trading 212 suitable broker for beginners

Geared towards the European and American markets, Trading 212 offers a variety of investment options, including real and fractional shares and ETFs. Its compatibility with iOS, Android, and web browsers like Safari and Chrome enhances accessibility. However, it doesn’t support external trading platforms like MetaTrader or cTrader.

What I Like About Trading 212:

  • This platform’s intuitive design streamlines the trading experience, offering a seamless account setup and a user-friendly interface, ideal for beginners.
  • Trading 212 attracts new investors by eliminating trading fees on stocks and ETFs, making it a cost-effective choice for budget-conscious traders.
  • As a broker regulated by the EU and UK authorities, it ensures a secure and compliant trading environment.
  • The flexibility to set up accounts in USD, GBP, or EUR allows traders to manage their investments in a preferred currency, reducing potential foreign exchange issues.

What They Should Improve:

  • The lack of social investing features on Trading 212 might deter traders who value community insights and copy trading opportunities.
  • Its support materials are somewhat limited, which may leave users seeking more in-depth guidance or advanced trading support.
  • Without algorithmic investing options, Trading 212 may not appeal to traders interested in automated or high-frequency trading strategies.
  • The exclusion of US clients restricts the platform’s global reach, limiting its accessibility to a significant market of potential investors.

Who Should Use Trading 212?

If you’re residing in Europe or the UK and have an interest in the world of stocks and ETFs, an intuitive online broker could be a valuable resource for you. This platform makes investing more accessible and user-friendly, especially for those new to the financial market.

> Read review

Try Trading 212

eToro

eToro is a renowned market maker established in 2007 (initially RetailFX) in Israel. It has expanded globally, with offices in the UK, US, Australia, and Cyprus. With a massive following, eToro ranks among the top broker choices, boasting an impressive 32 million registered users.

eToro is an alternative to DEGIRO
etoro Online Broker with Social Investing

Their marketing efforts include partnerships with celebrities like Kristian Nairn (Hodor from Game of Thrones) and Alec Baldwin. Not to mention their omnipresence in online ads, including YouTube, all while catering to millions of users.

What I Like About eToro:

  • Regulated by reputable authorities in countries like Cyprus and the United Kingdom.
  • Boasts an intuitive platform, a user-friendly smartphone app, and a handy demo account for practice.
  • Allows you to invest by mirroring other investors for inspiration – copy trading.
  • A vast array of asset classes is available for trade, including fractional shares, ETFs, and cryptocurrencies.
  • eToro offers the option to invest with or without leverage, unlike some other market makers such as XTB.

What They Should Improve:

  • A relatively high initial deposit is required; you won’t be able to deposit less than $10.
  • Withdrawal commissions may apply in certain cases.
  • It lacks a news feed to help you stay informed about your investments.
  • Spreads could be a bit lower.

Who Should Use eToro?

Investing in fractional shares and ETFs is a strategic option for long-term investors seeking affordable access to real assets, sans trading fees. It’s worth exploring, though fractional shares have their unique aspects. Additionally, there’s the option to mirror other traders in real time, but please, take time to study and grasp the associated risks before diving into trading.

> Read review

Try eToro

eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk.

DEGIRO

DEGIRO, an extremely popular broker in Europe founded in 2013, is based in the Netherlands. It’s been gaining popularity and currently serves well over 2.5 million clients in 18 different countries, primarily in Europe.

DEGIRO enables online trading in numerous markets, including the United States, United Kingdom, Germany, France, Spain, Australia, Japan, and more. You have the flexibility to trade with or without leverage. Additionally, they offer a promotion allowing commission-free trading of select ETFs once a month when you invest a minimum of $1,000.

What I Like About DEGIRO:

  • Opening an account with DEGIRO is effortless, and its platform is user-friendly.
  • DEGIRO is regulated by multiple financial authorities, including the German BaFin and De Nederlandsche Bank.
  • DEGIRO offers a diverse range of tradable securities, including stocks, ETFs, bonds, options, and futures from markets in the US, major European countries, Asia (e.g., Hong Kong, Singapore, Tokyo), and Australia.

What They Should Improve:

  • It’s not possible to trade some assets such as CFDs, Forex or Cryptocurrencies.
  • There is no demo account for you to practice with, but opening a regular account is free of charge. Of course, you can’t practice as you would with virtual funds.
  • Unfortunately, DEGIRO is limited to clients in the United Kingdom and select European Union countries. It’s unavailable for those in the United States, Japan, Singapore, Australia, and similar regions.

Who Should Use DEGIRO?

DEGIRO appears to be a solid choice for both beginners and experienced traders. It’s simple to use, yet offers various order types (like stop loss) and research tools that appeal to advanced users. However, it’s not the top choice for trading derivatives.

Read review

Interactive Brokers

IBKR, a US-based group with over 40 years’ experience in the financial sector, serves over 2 million customers. They promise low fees, user-friendly tools, and a wide variety of assets and markets. But, does it all hold true?

Interactive Brokers Homepage
Interactive Brokers Homepage

It maintains an official presence in countries including the United States, Luxembourg, the United Kingdom, Canada, and Japan, thus being supervised by numerous institutional bodies in these serious countries.

What I Like About Interactive Brokers:

  • Available in numerous countries, including the US, Canada, UK, Japan, Australia, Brazil, and many European countries.
  • Offers a wide range of products, including stocks, ETFs, mutual funds, bonds, currencies, and derivatives like CFDs and futures.
  • Provides access to 155 markets and countries with support for 26 different currencies on its platform.

What They Should Improve:

  • The app’s user-friendliness and the account opening process could be simplified.
  • The commission system might be complex, given the extensive range of features, assets, and markets.
  • Full platform access requires downloading software, and the web/mobile versions might miss some desktop features, like trading specific instruments such as bonds, warrants, or futures.

Who Should Use Interactive Brokers?

Interactive Brokers suits both experienced investors (e.g., for derivatives trading) and those looking to trade stocks, ETFs, funds, or fixed income assets.

XTB

Founded in Poland in 2002, it operates in many countries, including the UK, Germany, Italy, France, and Spain. Offering extensive market access, its comprehensive investing platform features various options and tools, such as robust charts for technical analysis.

XTB Online Broker
XTB Online Broker

XTB enables trading in CFDs on shares, ETFs, indices, Forex, and commodities. In select countries, trading in real shares and ETFs is also available. Its offices are located in various countries, including the United Kingdom, Spain, Germany, and France.

What I Like About XTB:

  • Registered with the UK FCA and other regulatory bodies in Spain, France, Germany, and Portugal.
  • Opening an account is easy. There is also a demo account where you can test the platform with fictitious money.
  • Fast fund additions via credit/debit card, bank transfer, Skrill, PayPal, and other e-wallets.
  • Spreads seem to be among the tightest in CFD trading.
  • XTB offers trading in both real assets like stocks and ETFs, and CFDs. Additionally, you can trade fractions or full assets.

What They Should Improve:

  • There is a minimum deposit of $250.
  • Derivatives trading requires leverage, but stocks and ETFs can be traded without it.
  • While the platform offers numerous options, this added complexity can make it more challenging to use compared to others.

Who Should Use XTB?

XTB caters to serious traders in derivatives, requiring a minimum deposit of $250. It’s also for those interested in stocks and ETFs, though availability varies by country.

> Read review

Try XTB

IG Broker

Founded in 1974 and boasting over 200,000 clients globally, IG Broker ranks among the world’s most popular brokers. Offices are located in the United Kingdom, Germany, the United States, France, Japan, Singapore, and Spain.

IG Broker for beginners
IG Broker

As a market maker, it specializes in CFDs, offering over 17,000 assets for trading. However, competitors like XTB and eToro offer more diverse product portfolios.

What I Like About IG Broker:

  • A prominent broker with over 200,000 users, showcasing a longstanding tradition in finance.
  • IG doesn’t impose a minimum deposit when opening an account.
  • Intuitive, featuring numerous charts and analyses for use.
  • Includes a demo account for practice and testing brokerage skills.
  • Available in multiple countries, including the USA, UK, Japan, Singapore, Spain, France, Germany, Holland, and Italy.

What They Should Improve:

  • An inactivity fee is charged if no trading occurs for 2 years.
  • More suitable for derivative traders than for stock trading.
  • Multiple account types with varying spread levels and features can be confusing.
  • Spreads may not be the most competitive at present.

Who Should Use IG Broker?

Ideal for intraday traders seeking advanced features like charting and specific order types, such as stop-loss. If you have no trading knowledge, I would suggest you look for another alternative with which to trade real assets such as stocks, ETFs, funds or bonds.

AvaTrade

AvaTrade, operating since 2006 as a derivatives broker, has gained the trust of 400,000 + clients to invest their money. AvaTrade enables trading in various CFDs, including stocks, currencies, ETFs, cryptocurrencies, indices, and commodities. However, buying and selling underlying assets like stocks, ETFs, or fixed income isn’t possible.

AvaTrade broker
AvaTrade Is a CFD Broker

What I Like About AvaTrade:

  • Opening an account with AvaTrade is 100% online and fast.
  • The spreads on their CFDs appear to be tight.
  • They have a trading calculator that will help you understand how much you will pay in commissions on each trade.
  • This broker is regulated in several major countries, including the UK, Ireland, Australia, Japan, and South Africa.

What They Should Improve:

  • It doesn’t have the widest choice of markets and instruments for CFD trading.
  • It’s unavailable in certain countries, including the United States and Canada.
  • AvaTrade is only able to trade derivatives.
  • Its charting system could be more comprehensive.
  • AvaTrade charges a very high inactivity fee.

Who Should Use AvaTrade?

It’s a suitable choice for those seeking a CFD trading broker, though it’s worth noting their range of markets and instruments isn’t the broadest. – e.g. eToro and XTB offer more.

Read review

IC Markets

IC Markets, founded in 2007, is an online forex and CFD broker based in Sydney. Offering over 2200 CFD assets, this broker includes stocks, currency pairs, indices, commodities, and cryptocurrencies. As IC Markets lacks its own platform, you’ll need MetaTrader or cTrader for trading.

IC markets homepage
IC Markets is a CFD Broker

What I like About IC Markets:

  • Serving clients globally, IC Markets operates in many countries, including the UK, Australia, Germany, France, and LatAm.
  • Regulated in multiple regions, including the UK, Australia, and the EU, IC Markets adheres to diverse standards.
  • Opening a demo account with IC Markets is straightforward, and they’re also flexible.
  • Trading options include social trading via Zulu Trade and algorithmic trading using programming
  • The broker supports various currencies such as USD, EUR, AUD, JPY, and GBP.

What They Should Improve:

  • Limited to CFD investments, it’s not suitable for those interested in real stocks, ETFs, bonds, etc.
  • The interface, particularly MetaTrader 4, 5, and cTrader, is notably outdated.
  • The range of instruments is limited compared to other platforms.
  • Account security could be enhanced, notably by adding 2-factor authentication, and revising how usernames and passwords are delivered.

Who Should Use IC Markets?

Best for experienced traders, IC Markets is less ideal for beginners and long-term investors due to its focus on CFDs and steep learning curve.

> Read review

IQ Option

IQ Option is undeniably among the prominent players in the online brokerage industry, boasting over 20,000 trades per day. It maintains a presence in 31 countries, including the UK, Germany, France, Italy, Portugal, and Spain.

Is IQ Option a good broker for beginners?
IQ Option To Trade Derivatives

IQ Option is headquartered in Cyprus, and its operations are regulated by the Cyprus Securities and Exchange Commission (CySEC). Additionally, the broker is registered with reputable regulatory authorities, including the British FCA, the Spanish CNMV, the Italian Consob, and the French Regafi, among others.

What I like about IQ Options:

  • Professional platform with many options for charting and analysis.
  • Investing economically in various financial markets (like stock exchange, Forex, cryptocurrencies) is feasible using derivative products.
  • Regulated by many countries

What They Should Improve:

  • Trading without leverage is not possible on IQ Option.
  • Only derivative trading (with CFDs) is possible, not ideal for beginners or investors who don’t understand the risks.
  • Offers fewer markets and assets than other trading platforms.
  • The web platform tends to be somewhat slow.
  • Unavailable to clients in the US, Australia, and Israel.

Who Should Use IQ Option?

This platform is ideal for seasoned short-term investors seeking a fast and cost-effective way to invest in derivatives.

> Read review

Types Of Brokers

There are many ways to classify different brokers, but for simplicity, they can traditionally be divided into two categories.

Market Makers

Market makers create a unique market for clients (investors) to trade in. Consequently, trades don’t reach the interbank markets. Orders are executed internally, with prices based on client supply and demand.

The market maker acts as your trading counterpart. They take the opposite position to your order: if you buy, they sell; if you sell, they buy.

Typically, market makers don’t charge trading commissions. They earn from the spread – the difference between their set bid and ask prices.

Plus500 spread examples
Plus500 spread examples

Example:

Imagine buying Apple shares via the fictional broker MarketMaker Inc. They offer a bid price of $117.66 and an ask price of $117.70 for clients. The $0.04 difference is the spread, which is how the broker makes revenue, besides various service fees.

You might know IG Broker, IQ Option, XTB, or eToro – some of the most popular market makers currently.

Advantages of market makers:

  • Provide liquidity for buying or selling anytime.
  • Offer user-friendly and often cost-free trading platforms, although inactivity fees may apply.
  • Usually don’t require much capital to start investing.
  •  Lower costs and quicker trades than non-market maker brokers, ideal for derivatives trading

Disadvantages of market makers:

  • Potential conflicts of interest, as they profit from user losses by being the counterparty.
  • Mainly offer derivatives, riskier and more complex than equities, not ideal for novices.
  • Set bid and ask prices to profit from spreads, which may be wide in rare cases, reducing profitability.
  • Often require trading with leverage, meaning borrowing from the broker.

Some users think all market makers work against traders and manipulate platforms. Although this might happen occasionally, most investor losses are due to personal actions, not market maker manipulation.

A lot of good brokers out there are market makers. If they were up to no good, they wouldn’t have so many users. It’s smart to go for brokers that are regulated by reliable countries, such as EU members, Japan, the United States, or other countries you have faith in.

STPs and ECNs (Non-Dealing Desk)

These brokers connect buyers and sellers, enabling the purchase and sale of financial assets.

You won’t buy or sell assets directly from these brokers. Instead, they link you with other investors or liquidity providers, like investment banks. They’re not your trading counterpart; they simply facilitate asset trades between two parties.

Advantages:

  • They offer direct market access, ensuring asset prices closely mirror real market values.
  • Unlike market makers, they pose no conflict of interest, as they don’t trade with you but merely facilitate trades.
  • This type of broker often offers the opportunity to trade real assets rather than derivatives
  • Often, they enable trading in real assets instead of derivatives.
  • Generally, trading without mandatory leverage is possible.
  • You should be able to transfer assets from one broker account to another one.

Disadvantages:

  • Slightly higher commissions may be charged, as this is their main income source.
  • Minimum capital requirements to access their platforms may be imposed.
  • Liquidity might not always be high due to reliance on matching buyers and sellers.

Things To Consider When Choosing A Broker

Before deciding on a trading platform, it’s essential to understand key factors.

Commissions

Choosing a broker requires considering commissions and fees, which significantly impact overall returns. Here are the main types of commissions you may encounter:

  • Annual commissions: Some brokers charge an annual fee for account maintenance, although this is relatively uncommon.
  • Inactivity Commissions: Some brokers assess inactivity fees if no trades are made during a specific period, like a quarter.
  • Trading Commissions: Brokers often charge a commission for trading securities like stocks. However, some, especially market makers, don’t charge a separate commission, earning instead from the spread between bid and ask prices.
  • Foreign Exchange Commissions: Trading in currencies other than your broker account’s base currency (like buying shares in Japanese yen) may lead to foreign exchange commissions.
  • Funding Commissions: Requesting money for trading or failing to add funds to a negative account incurs a commission from the broker for the loan. Remember, these are charged daily and can accumulate significantly.

Leverage

Leverage, often used by investors like day traders, amplifies trading positions beyond the funds invested with the broker.

For example, if you invest $10,000 in the Forex market with only $1,000 as margin at the broker, your risk isn’t limited to $1,000. Your exposure and potential losses are based on the entire $10,000 investment, even though you only deposited $1,000 as margin.

Leverage affects your earnings and losses.
Leverage affects your earnings and losses.

Be cautious, as leverage can be risky if not understood properly. If the market moves against you, you’ll need to deposit more funds to maintain the margin. Failing to do so on time results in financing commissions, akin to interest charges on a loan from the broker.

Ease of Use

Trading platform usability is critical for your overall experience. It should be user-friendly and meet your specific needs.

It’s always good to check out the demo account, if available. Here, you trade with fake money – not thrilling, but it’s a safe way to learn without risking your capital.

Security and Accounts

Broker security is a controversial topic, and it’s tough to determine a broker’s security level. I typically consider a few factors:

The risk of the broker collapsing
The risk of the broker collapsing
  • Are they regulated by a reputable country? For instance, is the broker in a loosely regulated distant country, or in a state with stringent financial legislation (like the USA, EU, Japan, Australia, etc.)?
  • Are they a publicly listed company? While not a complete guarantee, a stock exchange-listed broker must disclose their accounts and undergo audits, offering additional reassurance to users.

Graphics and Analysis Tools

Many advanced users, particularly traders, seek a tool for drawing charts, projecting charts, and performing calculations. Ensure the platform you’re considering has all the features you need in a broker.

Compare instruments with Plus500
Broker charting tools example

Additionally, check if they offer comprehensive tutorials. A broker with many features but without guides to explain them isn’t very practical.

Order Executions

Brokers have several options for investors when it comes to executing orders, so you don’t have to monitor the stock market continuously to determine when to enter or exit trades.

The most typical orders are:

  • Market: This is the fastest way to instruct your broker to buy or sell an asset.
  • Limit: These are orders in which the investor specifies the price at which they are willing to buy or sell. If a bid is found at that price, the order will be executed.
  • Stop Loss and Stop Profit: These are price levels that determine when an order is executed to safeguard against market fluctuations. For instance, if you set a Stop Loss order at $99 for Apple shares, your broker will automatically sell your Apple shares if the price drops to that level – Stop Profit functions similarly.
  • Dynamic Stop: The sell level of your order adjusts as the market moves in your favour. In other words, the price of your stop loss is calculated based on the asset’s price evolution.
Please note that order prices are often not guaranteed. For example, during periods of high volatility, the broker may be unable to fill your order at the price you’ve specified and will fill it at the next available price.

Deposits And Withdrawals

Finally, you should ensure that you are aware of the methods your chosen broker offers for depositing and withdrawing funds from your account.

Typically, it’s recommended to withdraw funds using the same payment method (e.g., bank transfer) that you used to deposit them for security reasons.

The most common methods include charging your credit card, bank transfers, or electronic payment options like PayPal or Skrill.

Additionally, you should consider the speed at which these funds are processed. For instance, if your account balance is negative, you may incur commission charges. To prevent this, it’s advisable to use the quickest deposit methods, such as PayPal or credit card, which are typically faster than bank transfers.

Available Markets

It’s vital that your broker operates in the markets you’re interested in investing in. For instance, if you’re focusing on US stocks and your broker doesn’t operate in this market or offers limited assets, it’s a poor choice.

Generally, most brokers let you buy major assets from key markets, like stocks from the S&P 500, European, or Asian markets.

Available financial markets in your broker
Available financial markets in your broker

Conversely, if you’re interested in niche investments like specific ETFs or shares from lesser-known companies, you’ll need to research to find the right broker.

Consider a financial market as a forum where assets are traded between buyers and sellers. Below, we’ll explore various asset classes, like stocks, bonds, currencies, and derivatives.

An example of this:

In Barcelona, where I live, card enthusiasts meet weekly to trade cards. They have varied interests, from Pokemon to football, and even Harry Potter cards. Obviously, Barcelona isn’t unique in this aspect. Cities like Manhattan, London, Rome, Berlin, or Paris also have spots for trading cards.

Financial markets are quite similar.

Main Financial Markets

There are many types of financial markets, depending on the type of asset being traded. But the most important are:

  • Money Market: This is where money and short-term assets are traded. It’s a wholesale market for large institutions and investors, known for its high liquidity.
  • Capital Markets: These aim to raise capital for companies through shares and debt (medium to long-term), with higher risk. They include fixed income (e.g., shares) and equities (e.g., bonds).
  • Foreign Exchange Market (Forex): Here, participants trade different currencies. For example, you can exchange euros for dollars.
  • Bond Markets: Public and private entities use this market for financing. Investors can buy public debt, usually as fixed income securities.
  • Financial derivatives market: This is a market where complex financial products, known as derivatives, are traded. These products don’t have intrinsic value, but rather depend on other assets. For instance, we can have a derivative product like a CFD on Tesla shares. The price of this CFD will depend on the price of Tesla shares, but it’s not equivalent to owning actual Tesla shares. We’ll delve deeper into these products in the next few paragraphs.
Keep in mind that the level of regulation in a market generally correlates with its safety, reducing the likelihood of problems such as illegal activities or ethical concerns for small investors.

However, it’s essential to remain cautious, as these risks may not completely vanish, regardless of the market’s level of regulation. For instance, the cryptocurrency market remains unregulated, which is why it appears to carry a higher level of risk.

Available Financial Products

Various financial products are available for investment, categorized into fixed income and equity products.

Fixed Income

Fixed income assets, paying known interest over their lifespan, are a lower-risk choice, suitable for security-seeking investors. Although theoretically lower risk, they’re not risk-free and may involve default, liquidity, or interest rate risks. They can be public (like government bonds) or private, with foreign currency fixed income products carrying exchange rate risk.

Equities

Equity investments, offering an unknown return, carry higher risk than fixed income investments. Popular equity assets include shares, with separate categories such as Forex, cryptocurrencies, and derivatives.

  • Shares: Investors buy shares to become partial company owners, with returns from dividends or sale price differences.
  • Forex: This involves trading currencies, speculating on price fluctuations, usually with leverage and short-term trading.
  • Mutual Funds: These pool money from multiple investors to invest in various assets, both equities and fixed income, offering diversification.
  • ETFs: Very similar to mutual funds, but you can trade them at any time, unlike mutual funds. ETFs generally invest in some sort of index.
  • Cryptocurrencies: Investments in digital currencies like Bitcoin are highly volatile and less regulated.
  • Derivatives: Complex products like futures, options, swaps, and CFDs depend on underlying assets and are high risk.

What Types Of Assets Should I Invest In?

Vanguard investment funds
Vanguard investment indexed funds

Consider index products that track financial indices. They often outperform managed funds long-term, have lower operating costs, and offer high diversification. Invest in index products through brokers like XTB or eToro, or consider a roboadvisor for simplicity.

Final Thoughts On The Best Brokers for Beginners

I hope this guide has helped you decide what type of broker you need and assess the different alternatives available in the market.

Remember, investing always involves risks. Here’s a basic piece of advice: Don’t invest in what you don’t understand. If you have questions, feel free to leave a comment below; I’ll try to help.

FAQ

A trader is someone who invests in the financial markets (i.e., an investor), while a broker is the agent or platform bringing investors together to facilitate asset trading.

Basically, no. With market makers (e.g., eToro, XTB, and similar brokers), the investment platform takes the opposite role in your investment (if you buy, they sell, and vice versa). They might profit more if you lose money. However, if they manipulated accounts or played against you, investors would likely stop using them. Still, a conflict of interest could exist.

If you’re keen on investing in the stock market and selecting your assets, yes, you’ll need a broker to facilitate these investments. If this seems too complex, consider simpler options like robo-advisors.