Choosing a Indices Broker
All traders use a broker to handle their transactions. Trader makes a decision on which transaction to make, then places an order with a broker who then executes the order for them & earns money by charging a commission or a fee called "the spread" for their services.
Indices brokers are associated with large financial institutions such as banks in order to provide the funds and liquidity necessary for margin trading. The banks are known as liquidity providers. Banks are also the ones that provide the interbank exchange rate to the brokers. Indices trading is traded through a network of banks known as "interbank network". Stock Indices Brokers gain access to this interbank network through banks, and then provide this access to retail stock indices traders.
A good indices broker should be signed up with a well known regulatory authority such as CFTC, NFA, CYSEC, FCA, ASIC & FSP these authorities serve as protection measure against fraud and abusive trade practices.
Before you start you need to set up an account. You may feel overwhelmed by the number of companies that offer these services online.
Deciding on a good company requires a bit of research on your part, but the time spent researching will give you insight into the services provided and fees charged.
The best recommendation is word-of-mouth advice, & this is just as valid in indices trading as it is for any other type of business.
You also want to find a broker who executes orders quickly with minimum slippage & should offer automatic/instant execution and have clear policies regarding slippage.
Next you want to find out the fees involved i.e. Spread. If spread charged is fixed or variable. Are there other charges like commissions per lot transacted?
Margin trading is what Indices is about, so be sure you understand the margin terms requirements before setting up an account. You need to know the margin requirements and how the margin is calculated.
Does the margin change according to the indices traded? Is it the same every day of the week or does it vary? Some brokers may also offer different margin requirements for mini and standard indices accounts. Some may also change their margin requirements during the weekends. Do not choose those that changes their margin requirement during the weekends as this might mean your open position are likely to be closed over the weekend because of the changing margin requirement during the weekend. Always select the one that has fixed margin requirement at all times.
The software is also very important to a indices trader. You can get a feel of the software options that are available by trying out demos from a few companies online. Above all, you're looking for reliability & the ability to execute transactions in fast-moving markets.
To make sure that you get fast execution from your indices broker make sure that you trade with big Indices companies that have enough liquidity required to execute orders quickly. The big companies have multiple liquidity providers and these multiple liquidity providers ensure that the company that you choose can execute as many trades as possible at any one given time in a very fast and efficient manner, that way your orders do not get re-quoted.
Factors to Consider When Comparing
Before comparing brokers we recommend that you don't open an account with a USA based company, regulation by the CFTC & NFA imposes excessive & over-bearing regulations that have been imposed on USA based companies. These include reduced indices leverage levels, no hedging rule and the FIFO (first-in-first-out) rule which affects the way you trade. The FIFO rule states that the first trade you open must be the first one you close, & keeping track of your orders especially if you open many of them might be difficult for you.
The following are the factors you should consider:
Regulation
Regulation is an important factor to consider when comparing, regulation is carried out by financial regulation authorities like FSA, NFA, CySEC and others. You should always open an select a company that is regulated.
Deposit and Withdrawal
When it comes to depositing and withdrawing money from your account, you should consider the following:
What is the minimum deposit required?
How long does it take to withdraw money?
Is there any deposit or withdraw fee?
It is also crucial that you find out what payment or money transfer methods are available for use with for example Wire Transfer, Credit Card, Debit Card, Pay Pal and others that are suitable for you.
Minimum Deposit Requirements
How much money do you need to deposit so as to open an account? - The minimum for most is $100 but for some its less. This is important to consider when comparing two or more.
Software Platform
The platform provided can be used for comparison & one-can choose the best type of software. Most popular software is the MetaTrader 4.
MT4 is the best platform with powerful technical tools and charts that is why most if not all brokers offer the MetaTrader 4. If you are a newbie choose one that offers you MT4 that way if you decide to move to another one you will still find the MetaTrader 4 platform that way you do not have to re-learn a new software every time you decide to try a new one.
Charting is very important & you need a powerful indices charting software with good charts and indicators so as to make the right decisions. The best choice is a one that offers good quality charting software such as the MetaTrader 4.
Order Execution
Consider if execution, is instant, is it that of an STP. Best model is STP model, with high liquidity to guarantee order execution.
Indices Leverage & margin
Should give you the option to choose indices trading leverage 1:50, 1:100 1:200 or 1:500 for the risk takers. However anything above 1:200 is too high 1:100 is the optimum stock indices trading leverage.
Account Types
Should offer micro, mini and standard stock indices trading accounts for a trader to select the one which they want.
Customer Support
Should provide customer and technical support during the stock indices trading market hours, either via email, phone or online chat.
Before choosing a company to open an account with you might want to check the customer support & professionalism & compare this between different one.
Factors to Consider for Comparison
The fact is that genuine & regulated companies come with a guarantee of being genuine.
The company you choose should be suitable for all trader types whether it is scalping, day, swing or position trading. Most will not accept scalping: these are not recommended even for non-scalpers. Those that don't allow scalping might be because they do not have enough financial liquidity to guarantee execution of your orders. This is bad even for others traders because your orders might not be filled at the correct point & you might get re-quotes.
A good stock indices broker will be suitable for traders of all levels of expertise. Beginner Traders should find the trading conditions to be quite flexible and the platform easy to use, while professional traders should benefit from high liquidity and instant execution of orders.
The factors below should be used when comparing, visit their site look at the information provided and use your judgment to make a choice if they are is best for you.
- MT4 software
- Up to 1:200 indices trading leverage
- Funding through WebMoney, Liberty Reserve, PayPal, Money Brokers, bank wire, credit card, debit card and other payment options
- Minimum deposit $100
- Bonuses on deposits
- In addition to indices , other financial instruments such oil, indices and silver and stock indices
- Instant execution of orders, no re quotes
- STP
- Professional customer support
- Well regulated by a financial authority
Recommended broker is one that will ensure you trade better by offering you the best tools & support for stock indices trading analysis.
Indices trading means the exchanging of one financial instrument for another in the stock indices market. Stock indices market is one of the largest market in the world. With the aim to earn substantial profits, new investors are jumping into the stock indices trading market everyday.
Investors, who take time to know the basic knowledge and information, definitely earn high returns on their investment than those who don’t.
However there are times, when investors fail to do anything right in the stock indices trading market because of lack of enough information and awareness regarding indices trading. Thus, it is recommended to select one before investing in the stock indices trading market. A good stock indices trading broker can improve an investors result by providing the best execution of transactions, there are many companies out there that one-can select from but not all are good. One thing to look out for is to choose one that is regulated.
While choosing, make sure that they are the best for you. It isn't a tiresome task to find a broker having a long list of customers. But it is not enough for you. You should look for a one that is regulated. Also look at their terms & conditions this will help you know about their workings.
