Investing

When we invest, we allocate resources with the expectation of a positive return in the future. The time frame for investments can be anywhere from super-short term to very long-term.

A positive return can arrive in various ways. With some investments, the positive return comes when the sell the asset, because it has increased in value over time. Other investments are capable of providing us with a benefit while we still owe them, e.g. company shares that pay dividends or real estate that provide rental income. Some investments even do both, e.g. shares that both pay dividends and increase in value.

Generally speaking, investors are willing to take higher risks if the potential profits are higher as well. An investor might for instance be willing to invest early in a start-up company that is high-risk but also high-potential.

Investing in company shares

There are two main ways to profit from share investments:

• Sell the share for a higher price than you bought it for.
• Receive dividend payments from the share company.

Trading vs Investing

The difference between trading is that trading is an active short term activity. Investing is a long time passive activity. If you invest in a stock then you will keep it for weeks, months or most commonly, years. If you trade the same stock then you will usually buy and sell the stock within a short time span.  You might even buy and sell the same stocks several times the same day. The practise of buying and selling the same financial instrument during the same day is called day trading.

There are a number of financial instruments that have been developed mainly for day trading.  These include binary options (digital options),  CFD certificates and forex certificates.   You will need to open an account with a special broker for Forex trading if you want to trade forex.  If you want to trade binary options or CFD:s you need an account with a broker that specializes in the instrument you want to trade.

Stocks, Mutual funds and ETF:s are the best options if you want to invest long term.  Blue chip and dividend stocks are especially good choices.  It is best to avoid penny stocks.

Investing in mutual funds

In a mutual fund, the money from the investors is pooled and used to invest together, e.g. buy and sell company shares in various companies. Investing in a mutual fund can help the investor benefit from economy of scale, diversification and professional management, but also comes with costs and a notable loss of control.

Mutual funds are very common in the United States and Canada, but also exist in some other countries. There are also countries that have similar, but not identical solutions available, e.g. the SICAV in parts of Europe and the OEIC in the United Kingdom.

Mutual funds are typically labelled based on their principal investment, e.g. equity funds, money market funds, and fixed income funds. There are also hybrid funds.

Before you invest, it is important to decide if you want to invest in an open-ended fund, a closed-end fund, or a unit investment trust.

Hedge funds and exchange-traded funds are not mutual funds.

Investing in Exchange Traded Funds (ETF)

An exchange-traded fund (ETF) is a type of investment fund that is also an exchange-traded product. While parts of a mutual fund are sold directly from the issuer to each buyer, you can buy parts of an ETF from owners, at the stock exchange where the ETF is listed.

Examples of famous ETF issuers are BlackRock iShares, The Vanguard Group, State Street Global Advisors, Invesco, and the Charles Schwab Corporation.

Investing in a SICAV

A SICAV is a collective investment scheme common in certain parts of Europe. The name SICAV is derived from the French language. It is an acronym for Société d’investissement à capital variable, which roughly means investment company with variable capital. A SICAV is fairly similar to a United States open-ended mutual fund. (A United States closed-end fund is instead more similar to a SICAF: Société d’investissement à capital fixe.) Examples of countries where SICAV:s are a common type of investment are France, Belgium, Luxembourg, Switzerland, the Czech Republic, Italy, Spain, and Malta. It is important that you check the rules pertaining to the applicable jurisdiction, because they are not the same in every country where SICAV exist, even though SICAV:s are now being cross-border marketed within the European Union under the UCITS directive.

Investing in an OEIC

The open-ended investment company (OEIC) is a common type of investment in the United Kingdom, where it is regulated by the Open-Ended Investment Company Regulations 2001.

An alternative name for the same thing is investment company with variable capital (ICVC).

Since the OEIC is open-ended, new shares will be created each time someone wants to invest in the investment company. The company will also redeem shares as requested by shareholders.

OEICs are similar to SICAVs and United States open-ended mutual funds.

Umbrella OEIC

An umbrella OEIC is an OEIC that holds various sub-funds. Each sub-fund has its own investment goal and direction. There might for instance be one sub-fund that invests in mid-sized British companies, another sub-fund that invests within the European Union, and so on.

Benefits and Drawbacks of Trading vs. Investing

Trading and investing are two different approaches to growing wealth in financial markets. While both involve buying and selling assets, trading focuses on more short-term price movements, whereas investing is a longer-term strategy aimed at wealth accumulation over time. Each approach has its own advantages and disadvantages, making it essential to understand their differences before deciding which suits your financial goals.

Benefits of Trading

1. Faster Profit Potential

Traders can capitalize on short-term price movements and make profits within minutes, hours, or days. Unlike investing, where returns tend to be built over years, trading provides opportunities for quick gains through strategies like scalping, day trading, and swing trading.

2. Flexibility in Different Market Conditions

Trading allows participants to make money in both rising and falling markets. By using short-selling strategies, traders can profit even when asset prices decline, making it more adaptable to market volatility.

3. Higher Liquidity

Traders operate in highly liquid markets such as forex and stocks, where assets can be quickly bought and sold. This liquidity ensures that traders can enter and exit positions with ease, reducing the risk of being stuck with an asset.

4. Use of Leverage

Trading platforms often offer leverage, allowing traders to control larger positions with a small amount of capital. This amplifies profit potential but also increases risk, requiring proper risk management.

5. Excitement and Engagement

For those who enjoy quick decision-making, trading can provide a fast-paced and engaging experience. Traders frequently monitor price charts, economic news, and technical indicators, making it a dynamic activity.

Drawbacks of Trading

1. High Risk of Losses

The short-term nature of trading means traders are exposed to significant risks. Market fluctuations, incorrect predictions, and emotional decision-making can lead to rapid financial losses, and using leverage can exacerbate the situation even more. It is very important to have a solid risk-management plan in place and the discipline to stick to it.

2. Requires Time and Skill

Successful trading demands continuos market monitoring, analysis skills, and emotional discipline. Successful traders are typically those who stay updated on economic events, trends, and price movements, and more, which takes both time and effort.

3. Transaction Costs and Fees

Frequent buying and selling lead to higher transaction costs, including spreads, commissions, and overnight holding fees (when applicable). These costs can reduce overall profitability and it is important that your trading plan take them into account.

4. Psychological Stress

Trading can require quick decision-making under pressure, which can be stressful. Emotional reactions like fear and greed often lead to impulsive trades and poor risk management. It is a good idea to utilize tools such as stop-loss orders and take-profit orders, which makes it possible to make decision in advance instead of acting in the heat of the moment.

With that said, some types of trading are more fast-paced than others. Scalping and other types of day trading tend to rely a very small and fast price movements, but they are not the only available trading strategies. You may for instance wish to explore swing trading, where positions are held open for weeks or even months, reducing the need to act quickly. It is still considered trading rather than investing.

Benefits of Investing

1. Long-Term Wealth Accumulation

Investing typically focus on gradual wealth growth through capital appreciation and compound interest, and stock dividends can also be an important aspect. By holding assets for years or decades, investors can benefit from the power of time in growing their portfolios.

2. Passive Approach

Unlike trading, investing doesn’t require constant market monitoring. Long-term investors can set up their portfolios and make occasional adjustments, making it ideal for those with limited time and those who does not wish to frequently analyse the market and put in buy and sell orders.

3. Your Can Ride Out Short-Term Fluctuations

While investments are still subject to market fluctuations, long-term investors can ride out short-term volatility. Historically, markets tend to rise over time, reducing the risk of losses compared to short-term trading.

4. Dividend and Interest Income

Investing in certain assets – such as bonds, dividend-paying stocks, or rental properties – can provide passive income through regular payouts, adding to overall returns without having to sell off the assets.

5. Tax Advantages (In Some Jurisdictions)

Long-term investments often benefit from lower capital gains tax rates compared to short-term trading profits, which are taxed at higher rates in many countries. Before you make any decision, it is important that you check applicable laws and regulations for your particular situation.

Drawbacks of Investing

1. Slower Returns

Investing requires patience, as returns accumulate over years or even decades. Unlike trading, where profits can be realized quickly, investors must wait for assets to appreciate significantly. If something drastic happens, you may loose value that took years to accumulate.

2. Market Downturns Can Impact Value

Although investing reduces short-term risk, market crashes and economic downturns can cause portfolio losses. Investors must be prepared to hold through market cycles.

3. Not Prepared To Act Quickly

Unlike traders who will adjust positions frequently, investors often rely on the longer-term appreciation rooted in macroeconomic factors and corporate performance. They are less able and willing to react quickly to changes, and in many cases, reacting quickly would be acting against their investment plan.

4. Capital is Tied Up

Long-term investing requires locking up capital for extended periods, making it less accessible for immediate financial needs compared to trading, where positions can be closed quickly.

Trading vs. Investing: Which is Right for You?

• Choose Trading If: You prefer an active, hands-on approach, can handle short-term risks, and enjoy analyzing markets frequently.
• Choose Investing If: You want a long-term, lower-risk strategy that builds wealth steadily without requiring constant attention.

Ultimately, the best approach depends on your risk tolerance, financial goals, and time commitment. Some individuals combine both strategies, trading short-term while maintaining long-term investments for stability and future growth.

Different Types of Trading

Trading comes in many forms, each with its own approach, risk level, and time commitment. Whether you’re trading forex, stocks, or cryptocurrencies, the method you choose depends on your goals, market knowledge, and preferred strategy. Understanding the different types of trading can help you determine which style suits you best.

Which trading style that will work best for you depends on a variety of factors, including risk tolerance, available time, and experience level. Day trading (including scalping) requires constant market attention and quick decision-making during the trading session. Swing trading and position trading is an approach that do not rely on movements within a single trading day.

Generally speaking, we can also see how trend trading and news trading cater to those who prefer analysing macroeconomic factors, whereas algorithmic trading and high-frequency trading appeal to traders interested in technical analysis.

Understanding different types of trading allows you to select the one or ones that aligns with your skills, preferences, and financial objectives.

Day Trading

Day trading involves buying and selling financial instruments within the same trading day, with no positions held overnight. The goal is to take advantage of short-term price movements, and it is common among day traders to use technical analysis to identify entry and exit points. Day trading require fast execution, a strong understanding of short-term market trends, and a disciplined risk management strategy. Day traders tend to pick markets with a lot of liquidity, such as major forex pairs, heavily traded stocks, and futures markets.

Scalping is a subset of day-trading and is famous for being even more short-term than classic day-trading. It is an ultra-short-term trading strategy where traders make multiple ultra-fast trades throughout the day, capturing small profits from quick but small price changes. Positions are often held for just a few seconds or minutes. Scalpers rely on high liquidity, tight spreads, low commission costs, and fast execution to maximize returns. While scalping can be highly profitable, it requires significant skill, quick decision-making, and the ability to handle high-frequency trading. Nowadays, a lot of scalping is carried out using specialized software.

Swing Trading

Swing trading is a medium-term strategy where traders hold positions for several days or weeks, aiming to capture larger price swings. It relies on technical and fundamental analysis to identify trends and potential reversals. Unlike day trading, swing trading does not require constant market monitoring, making it suitable for those who cannot trade full-time but still want to take advantage of price movements.

Trend Trading

Trend trading involves identifying and following long-term market trends, usually through technical analysis. Traders enter positions in the direction of the prevailing trend and hold them until signs of a reversal appear. This strategy can be applied in different time-frames, from short-term to long-term trading. Trend traders often use indicators such as moving averages and trend-lines to confirm market direction. This approach is best suited for traders who prefer structured, methodical decision-making, and are skilled when it comes to technical analysis.

Position Trading

Position trading is a longer-term approach where traders hold positions for weeks, months, or even longer. It can sometimes be more or less indistinguishable from long-term investing.

Position traders tend to focus on fundamental analysis, including macroeconomic trends and geopolitical events that influence the market. Position traders aim to capture significant price movements and are less concerned with short-term fluctuations. This method requires patience and a strong understanding of economic cycles, and it involves less frequent decision-making compared to shorter-term trading strategies.

Algorithmic Trading

Algorithmic trading, also known as automated or algo trading, involves using computer programs to execute trades based on pre-set conditions. These programs analyse market data and execute orders automatically, eliminating emotional decision-making and increasing efficiency. Algorithmic trading is widely used in forex, stocks, and futures markets, particularly by institutional traders and hedge funds. It requires high-quality software and thorough back-testing to increase reliability.

News Trading

News trading focuses on market reactions to economic reports, political events, and major announcements. Traders enter positions based on expected volatility following key events such as central bank decisions, employment reports, and GDP releases. Since news trading involves significant price swings, it requires quick execution and strong risk management to navigate potential market unpredictability.

High-Frequency Trading (HFT)

High-frequency trading is a specialized form of algorithmic trading where large numbers of orders are executed in milliseconds. HFT relies on specialized computer programs, complex algorithms, high-speed data processing, and direct market access to gain small profits from market inefficiencies. This type of trading is primarily carried out by institutional investors rather than retail traders due to the expensive technology and access required.

Trading Software: Essential Tools for Traders

Trading software is a crucial part of any trader’s toolkit, providing access to financial markets, analytical tools, automation features, and more. Trading software refers to software solutions, including trading platforms, that allow traders to carry out tasks such as analysing market trends, execute trades, and manage portfolios.

Whether you’re trading forex, stocks, or cryptocurrencies, the right software can enhance efficiency, improve decision-making, and streamline execution. With numerous options available, choosing the right trading software depends on your trading style, experience level, and specific needs.

Types of Trading Software

The different types of trading software cater to various aspects of the trading process. Below, we have listed some examples of common trading software types.

• Trading Platforms
  A trading platform serve as the main interface for placing trades and managing your portfolio. Many of them also come with tools for analysing price movements. Trading platforms range from basic interfaces used mostly by beginners to advanced systems for experienced traders. Some brokers provide their own proprietary software, while others offer access to independent third-party platforms. Examples of well-known third-party platforms are MetaTrader 4 (MT4), MetaTrader 5 (MT5), and cTrader.
• Charting and Analysis Tools
  Designed for technical traders, this type of software provide advanced charting capabilities, indicators, and historical data. Charting features, indicators, and drawing tools can help traders make informed decisions. TradingView and NinjaTrader are two examples of popular choices within this category.
• Algorithmic Trading Software
  This type of software will analyse the market and automatically execute trades based on pre-set strategies.

• Copy Trading Software
  Copy trading software allow traders to replicate the trades of other traders. Examples include eToro, ZuluTrade, and Myfxbook.
• News and Economic Calendar Software
  These tools provide real-time market news, economic event tracking, and fundamental analysis insights. Forex Factory and Investing.com are examples of software in this category and they are commonly used for news trading.

Key Features to Look for in Trading Software

When selecting trading software, it’s important to consider several key features to ensure it meets your trading needs. Here are a few examples of points that are good to keep in mind as you evaluate the available options.

• User-Friendly Interface
  The program should be intuitive and easy to navigate. You do not want to waste time and effort navigating a clunky interface. In the fast-paced world of trading, everything needs to work quickly.

• Speed and Reliability
  Fast execution of your commands is critical, particularly if you are a day trader who rely on quick market moves.
• Multi-Device Compatibility
  Many traders need access to their software via installed programs, directly in the browser, and one various mobile devices. Choosing programs with multi-device compatibility allows for greater flexibility.
• Security and Data Protection
  Strong encryption, two-factor authentication (2FA), and secure login methods ensure that traders stay protected.
• Customization and Add-Ons
  The ability to customize the interface and other aspects of the software can enhance efficiency. Add-ons can make the program even more useful.

Popular Trading Software Platforms

Trading software (a trading platform) is a crucial tool for traders, offering access to financial markets. Trading platforms will typically also provide other services, such as analytical tools to enhance decision-making. Whether you’re trading forex, stocks, cryptocurrencies, or s9omething else, choosing the right platform can significantly impact your success.

Which trading platform that is best for you will depend on several factors, including your experience and your trading strategy. Different platforms serve different niches. Some platforms will for instance specialize in technical analysis, while others focus on automation, copy trading or social trading. Beginner traders may prefer eToro for its user-friendly interface, while advanced traders might opt for cTrader or NinjaTrader for their deep analytical tools. Those who focus on automation should consider platforms with strong algorithmic trading capabilities, such as MetaTrader 4 or MetraTrader 5 with Expert Advisors (EAs), or cTrader with cAlgo.

Testing a platform using a free demo account is highly recommended before committing any real funds. This allows traders to evaluate the software’s functionality, speed, and overall trading experience without financial risk.

Below, we will take a look at some of the most popular trading platforms and what makes them stand out.

MetaTrader 4 (MT4)

MetaTrader 4 (MT4) is one of the most widely used trading platforms, particularly for forex trading. A very large number of brokers will give their clients access to this independent third-party trading platform.

Known for its user-friendly interface and robust features, MT4 provides traders with customizable charts, technical indicators, and support for automated trading through Expert Advisors (EAs). Its lightweight design ensures fast execution, while its availability on desktop, web, and mobile makes it accessible for traders on the go.

MT4 remains a favourite among beginners and experienced traders alike due to its reliability and vast community of users who develop custom indicators and scripts.

MetaTrader 5 (MT5)

MetaTrader 5 builds upon MT4’s foundation with additional features, making it more suitable for traders who require multi-asset trading capabilities. While the MT4 was primarily (but not exclusively) build with forex trading in mind, the MT5 has a more comprehensive support for other asset types as well, including stocks, commodities, and futures, making it a versatile choice for traders who want exposure to different asset types.

The MT5 also comes with additional features compared to the MT4, including a larger number of order execution types, and a very strong Depth of Market (DOM) functionality, allowing traders to see real-time liquidity levels. The MT5 also have more time-frames and technical indicators, which is appreciated by traders relying on technical analysis. To help with fundamental analysis and news trading, the MT5 has been fitted with a comprehensive built-in economic calendar.

cTrader

Designed for traders looking for direct market access (DMA), cTrader is popular among ECN (Electronic Communication Network) traders. This trading platform offers advanced order types, ultra-fast execution speeds, and detailed market analysis tools. cTrader also includes cAlgo, a powerful algorithmic trading feature that allows traders to develop, test, and automate trading strategies. Unlike MT4 and MT5, which rely on MQL programming, cTrader uses C# for algorithmic trading, making it attractive to traders with coding experience.

Just like MT4 and MT5, the cTrader platform is utilized by wide range of brokers.

TradingView

For traders who rely heavily on technical analysis, TradingView is one of the most powerful web-based charting platforms available. It provides a wide range of indicators, multiple chart types, and real-time price data, making it a favourite among professional traders and analysts. A key advantage of TradingView is its social trading feature, where traders can share and discuss strategies, charts, and trade setups with the community. The platform is compatible with various brokers, allowing traders to execute trades directly from the interface.

NinjaTrader

NinjaTrader is a professional-grade platform known for its advanced charting, back-testing, and automation capabilities. It is particularly popular among futures and forex traders who require precise market data and deep analysis tools. NinjaTrader supports custom indicators and automated trading strategies, allowing traders to optimize their approach through extensive market simulations. Its ability to process large amounts of historical data makes it a powerful choice for algorithmic and quantitative traders.

Examples of NinjaTrader compatible brokers are Charles Schwab, TD Ameritrade, FXCM, and Oanda Corporation.

eToro

eToro has revolutionized social trading and copy trading, making it a go-to platform for beginners who want to follow and copy the trading decisions of more experienced traders. Users can copy the trades of top-performing traders on the platform to gain exposure to forex, stocks, cryptocurrencies, and commodities. The platform’s intuitive interface, combined with a vast community of traders, provides a smooth trading experience that blends education with real-market participation.

eToro only works directly with its partner, Apex Clearing Corporation, and is not working together with any other brokers. If you are contacted by someone claiming to be a broker acting on behalf of eToro, or a broker claiming to give their clients access to the eToro trading platform, you should cut contact, because scammers sometimes use this technique to capitalize on the popularity of eToro among novice traders. If you want to use the eToro trading platform, you should sign-up directly with eToro and make sure you only communicate directly with the eToro customer support.

ZuluTrade

ZuluTrade is another well-known copy trading platform, allowing users to follow and automatically replicate the trades of experienced traders. Unlike eToro, ZuluTrade connects to multiple brokers, giving traders more flexibility in choosing their preferred trading environment. The platform ranks traders based on performance, risk level, and profitability, helping users make informed decisions when selecting signal providers.

How to Choose the Right Broker for Investing & Trading

Choosing the right broker is one of the most important steps for anyone looking to invest or trade. The broker you select will impact your market access, trading costs, execution speed, and more. Whether you’re a long-term investor or an active trader, finding a broker that aligns with your financial goals and strategy is essential.

It is not possible to crown any particular broker as the best one for all traders and investors, since how suitable a broker is for you will depend on a variety of factors, including your strategy, trading plan, goals, and preferences when it comes to the trading platform. You may even find that you should sign up with more than one broker, to suit different strategies.

Generally speaking, short-term traders should prioritize factors such as fast execution, tight spreads, a powerful trading platform, and a fee schedule (how commission is charged) that is suitable for short-term trading.

For an investor, it is more important to pick a broker that is suitable for the buy-and-hold strategy. You do not want to get stuck with overnight fees or use a broker who is generally aimed at providing short-term exposure to price movements rather than dealing with investors who want to buy and own assets outright.

Testing a broker with a demo account can help you assess their services before committing real funds. By carefully evaluating factors such as regulation, costs, platform functionality, and customer support, traders and investors can select a broker that best fits their financial goals and trading strategy.

Regulation

The first factor to consider is regulation.

For safety reasons, I recommend you pick a broker that is regulated by a reputable financial authority known for their strong trader protection. For many traders and investors, the best course of action is to pick a broker that is regulated domestically. This means that an Australian trader or investor will pick a broker regulated by the Australian Securities and Investments Commission (ASIC), a trader/investor in the United Kingdom will pick a broker regulated by the UK Financial Conduct Authority (FCA), and so on. If an issue were to arise between you and your broker, the legal situation will be less complex this way, since the broker is regulated where you are based. In some cases, it will also mean that you are protected by a national investor protection scheme or insurance, in case the brokerage company fails to adhere to its duties, e.g. due to insolvency.

For some traders and investors, picking a locally regulated broker is not the best option, however. You may be based in a country where online brokers are not properly regulated, or where the financial authority is not known to have strong trader protection. Some financial authorities have good regulation on paper, but are known to give shady brokers a lot of leeway or simply not have the required funding, resources and skills to properly oversee brokers and go after the rule-breakers. In such cases, it is not difficult to understand why traders and investors seek out brokerage companies regulated elsewhere, even if the creates a more complex legal situation when it comes to jurisdiction.

Examples of financial authorities known for having good trader and investor protection are the UK Financial Conduct Authority (FCA), the Australian Securities and Investments Commission (ASIC), the Commodity Futures Trading Commission (CFTC) in the United States, CySEC in Cyprus in the European Union, and the Financial Sector Conduct Authority (FSCA) in South Africa.

Chose a broker regulated by a financial authority that require transparency, fair trading practices, and client fund protection. Do not sign up with any broker that is not required to keep client money segregated from company money.

It is easy for a sketchy broker to claim they are regulated and approved by a reputable financial authority, so I recommend you always check directly with the applicable authority before you make any decision. Many financial authorities post this information on their official web site. You can also contact them directly through email.

Reputation

Does the broker you are interested in have a good reputation within the trading and/or investing community? Every broker (or other service provider) will have some disgruntled customers, but how is the general reputation of this broker? Do you see a certain issue popping up over and over again? Is the broker losing a lot of court cases against clients?

Security

Good security is of course paramount. You need a broker account and trading platform that is well protected from illicit entry. Can you use strong passwords and turn on 2-factor authentication? Is the information sent back and forth properly encrypted?

Trading Costs and Fees

Understanding a broker’s fee structure is crucial, as trading costs can significantly impact profitability. Typically, a financial brokerage company will make the bulk of their profits through spreads, commissions, or a combination of both. It is very important that you pick a broker where the spreads and commissions are suitable for your particular trading strategy.

So, what do we mean when we talk about spreads and commissions?

• Spreads represent the difference between the bid and ask price, with lower spreads generally being more cost-effective for active traders.
• Commissions are charged by trade. A broker can charge you both a buy commission and a sell commission, making money from both sides of the deal. When a broker is advertising commission-free trading, it becomes extra important to check the spreads, because some “commission free” brokers compensate themselves by having wide spreads.

In addition to these costs, investors should be aware of potential other fees, such as platform fees, deposit fees, withdrawal fees, inactivity fees, over night fees, leverage costs, and account maintenance charges. Transparency in pricing is essential, and comparing different brokers’ cost structures can help traders find the most affordable option.

Always compare what it would cost for you to utilize your particular trading strategy with a broker, using your favoured method for deposits and withdrawals. A broker that is very suitable for one trader and strategy may be all kinds of wrong in another situation. You need to look at the whole picture to obtain a fair view.

Market Access and Asset Availability

The range of financial instruments and assets a broker offers should match your trading or investment strategy. Long-term investors typically need access to assets such as stocks, ETFs, bonds, and mutual fund shares, while short-term traders may require forex trading and access to derivatives such as Contracts for Difference (CFDs). Derivatives can in turn be based on a wide range of asset types, e.g. stocks, commodities, forex pairs, and more.

Also look at the selection within the category or categories that you are interested in. An investor building a stock portfolio will for instance need a broker that makes it possible to attain a high level of diversification, so there needs to be stocks available for different geographical markets, different industries, different sectors, diffferent company types, etcetera. Choosing a broker with a diverse range provides more flexibility and allows for portfolio diversification.

Note: If you plan to trade multiple asset classes, ensure the broker offers competitive pricing and efficient execution across all markets. In some cases, you might find that it is better to sign up with multiple brokers, instead of settling for a lukewarm compromise.

Trading Platforms and Tools

The trading platform is where you will execute trades and manage your portfolio, and many traders also use platform tools and services for their technical analysis and/or fundamental analysis. Which trading platform your broker will give you access to is therefore extremely important.

A good platform should be user-friendly, reliable, and ideally also equipped with the necessary tools and services for your strategy so you don´t have to involve a lot of additional software and services off the platform.

Some brokers have their own proprietary platform, while others give you access to one or more of the third-party platforms, such as MT4, MT5, cTrader, and TradingView. Proprietary platforms can be designed to suit a certain niche, e.g. copy trading for beginners.

MetaTrader 4 (MT4) and MetaTrader 5 (MT5) are widely used, offering customizable charts, automated trading capabilities, and a large selection of indicators for technical analysis. cTrader is another strong option for traders who require transparency and direct market access, while TradingView is highly favoured by traders in need of advanced charting tools.

Before committing to any broker, testing their platform through a free demo account is highly recommended to ensure it meets your needs.

Execution Speed and Liquidity

For traders, execution speed is a critical factor, especially for those involved in day trading. A broker with high liquidity ensures that orders are executed quickly with minimal slippage. Fast and reliable execution helps traders capitalize on market opportunities and avoid unnecessary losses due to delays.

Traders involved in high-frequency trading will usually prioritize brokers offering low latency and ECN or STP execution, as they will need direct market access without interference from a dealing desk.

Leverage and Margin Requirements

Leverage allows traders to control larger positions with a smaller capital outlay, boosting both potential profits and losses. High leverage can be tempting, but it also increases exposure to market volatility.

Many of the stricter financial authorities around have put in ceilings that limit how much leverage a broker regulated by them is allowed to give to a retail trader (non-professional trader). This typically involves a main ceiling at 1:30, and lower ceilings for certain especially risky assets, such as cryptocurrencies and exotic forex pairs.

Strict financial authorities with strong retail trader protection will typically also require brokers to provide Negative Account Balance Protection for all retail trader account. This protection ensures that a retail trader does not end up with a negative account balance. If your pick a broker where you, as a retail trader, will get negative account balance protection, it is very important to learn about what this entails and adjust your strategy accordingly.

When online brokers are not limited by a financial authority ceiling, it is not unusual for them to offer leverage up to 1:500 or more. Very high leverage is especially common among forex brokers. Getting access to this type of very high leverage is one of the reasons why retail traders sometimes decide to sign up with brokers that are not regulated by any of the strict financial authorities. Going this route involves increased risk, as you are putting your faith in a broker that is not under the oversight of a strict financial authority.

If using high leverage is integral to your trading plan, you could consider taking the required steps to be classified as a professional trader instead of retail trader. Contact the support of the broker you are interested in to find out more about the requirements and see if you could qualify.

Deposit and Withdrawal Process

A smooth and transparent deposit and withdrawal process is essential for a positive trading experience.

Make sure you pick a broker that accepts a payment method you are willing and able to use, and that wont cost you a lot to utilize for deposits and withdrawal. Examples of common methods are bank transfers, credit/debit cards, and e-wallets such as PayPal, Skrill, and Neteller.

Some brokers accept cryptocurrency transfers, but these brokers are still few and far between, especially if you want to speculate on other assets than cryptocurrencies. Brokers that accept cryptocurrency transfers will normally only accept one or more of the really well-known cryptocurrencies, such as Bitcoin and Ether (Ethereum).

Generally speaking, cheques and wire transfers are slow and expensive to use, so savvy traders normally stay away from brokers where using any of those methods are required. It is also worth knowing that many scammers love wire transfers since such transfers are notoriously difficult to track if the alleged broker you sent money to turns out to be a fraud.

Regardless of your favoured transaction method, always check whether the broker charges any fees for processing deposits and/or withdrawals and how long transactions take to process. Reliable brokers ensure fast withdrawals without unnecessary delays or hidden costs. Difficulty withdrawing funds is a major red flag, so researching other traders’ experiences with a broker’s withdrawal process can provide valuable insights.

It is normal for a broker to require you verify your identity before you make your first withdrawal, but this process should not be overly complicated or slow. A broker asking for an ever increasing amount of documentation from you, or finding problems with all the documentation you send them, may be a broker that is deliberately stalling the process to avoid having to transfer money.

Before you sign up with a broker, look at their reputation within the trading community online when it comes to points such as withdrawal speed and fees (especially hidden fees).

Customer Support

A broker’s customer support can make a big difference, e.g. if technical issues or account concerns arise.

Make sure support is available through your preferred channel, e.g. live chat, phone, or email, and with fast response times.

It is important that you can contact the support even when you are logged out from the platform, because otherwise you will not be able to get help if you experience trouble logging in.

If phone support is important to you, check if there is a domestic number (or toll free number) available, or if a potentially costly call to a foreign country will be required. Some brokers have a call-back service or offer online calls to make sure their traders can access the phone support without paying for a pricey phone call.

Checking online reviews, forums, and independent ratings can provide insights into the speed and reliability of the support. A broker with a strong track record of positive customer service is more likely to provide a smooth and trustworthy trading experience.

This article was last updated on: February 25, 2025