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6 Tips Every Trader Should Know About Online Brokers - Part 2

3. Managing Your Expectations

Online stock brokerWhen you compare and choose a discount stock broker or futures broker, you have to temper your expectations and do not expect the same level of service as a full service broker. It does not mean that you have to accept bad service, it just means that adding support staff to a brokerage will add to their costs so dealing with an online discount brokerage may mean having to put up with minor service inconveniences due to the firm not being as fully staffed as a full brokerage.

In reality however, most discount brokers have tweaked their services offered and associated costs to such a level that they now offer above average levels of service comparable even to that of full-service brokers. Services to take note of while broker comparison shopping include 24-hour services, free check-writing privileges, dividend-reinvestment services, free funds transfer etc.

4. Securities Traded.

Not all stock brokers may trade the security that you are looking to trade. Some brokers specialize in trading stocks only whilst others may only offer futures and options. Most broker websites will clearly state what securities they trade in so make it a point to pay special emphasis to this. If you regularly short-sell stocks, it may be worth your while to inquire about whether a particular brokerage regularly has enough shares to "borrow" in order for customers to short-sell. This is especially important during down trending markets when the interest in short-selling stocks is very high among traders.

5. Custodial Services.

When you have spare cash laying idle in your brokerage account, most firms offer to hold your balance awaiting reinvestment. Some brokers hold the balance in a regular brokerage account that offers interest. In other cases, you can have your balance automatically invested in shares of a money market fund. Take note that some brokerages require a minimum balance before any interest is credited.

6. Minimum Activity in Account.

Some brokers may require a minimum amount in commissions or a minimum number of transactions in an account during a given period of time. This will affect those whose trading activity is very low but yet you will be incurring costs in maintaining an active account at your brokerage.

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