If you want to trade in stocks, you have to open an account with a stock broker. In doing so, you enter into a kind of business partnership with him. Your roles are defined. While you are investing the money, the stockbrokers are executing your orders. While you earn the profits from your investments, the stock broker earns commissions.



The process of opening an account involves revealing your vital personal and financial information to your broker. You cannot afford to part with such important information with any one and every one.

Since you are entering into an almost life long business relationship with your stock broker, you have to be very careful in choosing him. You have to fix up a well defined criteria for selecting a stock broker and see to it that he comes up to your expectations on a maximum number of points.

If you search on the internet, you can make a list of various facilities that the stock brokers offer. Enumerate them in order of importance. This is your criteria for choosing your stock broker.

As a well-informed, sophisticated trader and investor, you must ensure that your stock broker takes the lowest trade commissions and other charges. A one-time trade commission or any other brokerage charge usually appears insignificant, but if you calculated it over along time, they accumulate into a huge amount and can eat away a big chunk of your earnings. You have to be extra careful, if you are a frequent trader and more especially if you are a day trader.

As a day trader, either you close your trade at the end of the day and pay fees at the regular rates, or pay fees at higher rates if you carry forward your trade to the next day. And suppose you have to sell your stock at a loss the next day! You are a loser.

So, the first point in your criteria should be the brokerage charges. Compare the charges of the various brokers on a number of trade types rather than just one trade type. There are different brokerage charges on real time trades, scheduled investment plans, Dollar based investing, inactivity or account maintenance fees, fractional shares investing and so on. There are hidden charges, which you come to know only when they are debited into your account.

It is also advisable to consult stock trading magazines and journals to get the latest opinions on various stock brokers. For example, Forbes Magazine in one of its issues writes about deep discount brokerage offers coming up due to the severe competition among the brokers.

This is what the Forbes Magazine in its issue dated November, 27, 2006 had to say about the competition among the stock brokerage firms in the U S:

There is a price war going on among the discount stock brokerages in the US. The Bank of America, which also owns a brokerage unit, offered free trades to the customers if they kept an account balance of $25,000. The news sent the discount brokerage firms into jitters but there were stock brokers who came out aggressively and declared that free trades were indeed great. Imagine enjoying deep discount commissions without having to deposit huge amounts of money as demanded by the Bank of America! And to cap it all there are ?no annual fees and no annual minimum anything to quality.? The facility was available long before the Bank of America announced its decision. If you could not find a brokerage firm that offers deep discounts and even free trades, you did not make a thorough research to your disadvantage.

The next most important point in your criteria should be the trading technology used by your broker. Superior trading technology is not only needed for the fast execution of trade orders, it also required for the manipulation of the stock market research tools. You need to find stock symbols and latest to the second stock prices to place orders. You also require newsflashes on the latest stock market situation or other takes on the trade and industry. You need tools to analyze the stock prices on technical and fundamental levels through the study of charts, graphs and allied information material. You cannot afford to wait for ?ages? while the new window on your broker's website tries to open. Stock trading orders need to be executed within a matter of seconds, perhaps sooner. A slight delay may play havoc with your financial prospects.