How to Choose a Broker? Lesson 3

How to Choose a Broker? Lesson 3

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1. What is a broker? A broker is a middle man between you and the exchange. For example, if you want to buy 100 shares of Facebook symbol FB you put the order and submit it. Your broker job is to rout it to the exchange. When filled, you will see 100 shares of Facebook in your account.
2. There are two major kinds of brokers. One full service, this charge more commission. The second one is called discount broker. Mainly a small broker compared to the first one.
3. Discount brokers give the cheapest commissions. So your job is to search for one by comparing a lot of them.
4. A broker business relies on two things: Commissions and fees. When you buy a stock or sell it he cuts a commission. If you use his money like in margin account you should pay interest rate fee.
5. There are two major kinds of commissions. One is called a flat rate where you pay one flat rate like for each transaction. The second one is calculated by buying by shares where let say a share is {videoDescription}.01. If you buy a lot of 100 shares, you pay commission. But if you buy 1000 shares you pay . So your job is to choose which kind of commission you like. If you buy thousands of shares let say penny stocks, you should use flat rate better. If you like bigger stocks, it is better to buy by shares.
6. If you want a margin account that means you need to borrow money from your broker and to do selling short. Check the fees. The broker will sometimes charge u an interest rate to use his money. Brokers’ interest rate are not the same. Some are cheaper others are not. So you need to search before you apply for any broker.
7. Check if the broker charges an unactivity fee. That means let say you did not trade for one month, he will charge you a fee for not trading. Why? Because he did not make money from you. There are some brokers who charge, others don’t. So be careful.
8. Check if the broker charges for price streaming quote for the bid and ask. Some brokers charge you to bring you the real quotes of the bid and ask. Some other brokers dont charge anything. So again be careful.
9. Check online if the broker has a lot of problems with customers/traders. The reputation of the broker is very important.

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