Should You Use a Broker to Trade?

by Guest on August 25, 2012 · 0 comments

It never used to be a choice – if you wanted to buy stocks or bonds, you had to use a stock broker to trade.  However, now most brokerage companies allow individuals to trade “self-directed”, or essentially input their own trades into a computer to be executed, thus cutting out the middle man.  However, should you always skip the broker and trade stocks, bonds, or other investments yourself?

Why Choose a Broker 

The main reason that individuals choose a broker is because they offer expertise the individual typically feels they can’t get themselves.  For example, you may want to use a broker to get one-on-one financial advice from someone who has done the research, or understand complicated issues such as international trade or taxes.  Brokers also usually provide clients with much more than trading advice – they also usually offer retirement planning, total portfolio planning, tax advice, and more.

Using a broker to trade, unlike doing it yourself, usually costs more in fees, and there are also usually high account minimums that must be met before you can invest.  And then there is the issue of contacting them – if you invest in things like Forex, which trade 24 hours a day, what happens when you need to close a trade at midnight?  Can you get a hold of them? 

Options for Trading Without a Broker 

That is why, with the advent of the internet, more people have opted to trade without a broker.  The good news is that most brokerage companies offer options for these investors to open self-directed accounts.  Plus, many of these companies also offer many of the same tools available to the brokers – it’s just that you have to do the work yourself and spend some time learning their system.

If this seems overwhelming, there are a lot of tools to help you get started.  If you use trading software from Alpari UK, you can open a free practice account to learn the nuances of trading and investing before you actually risk real money.  This can be a great tool to get started.  You can use the research tools and identify investments that you are considering, and the do practice trades.  Then, you can check in on your portfolio a few weeks later and see how your trade fared.  If you did well, you might apply that strategy to real money and invest for the future.  And if your investment lost money, at least you didn’t lose any real cash.

And the great thing about doing it yourself is that you can do it any time it is convenient for you, not just when your broker is available to take your phone call.

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