One of the questions I’m asked most often by Maven readers is: ‘Which is the best spread-bet broker to use?’
Over the coming weeks, I’ll be showing you my preferred brokers – and telling you why I like them.
I’m not going to restrict myself to one ‘favourite’, because I adamantly believe that you shouldn’t restrict yourself either. I strongly advise anyone to have a minimum of two accounts on the go at any one time.
First, this gives you an insurance policy, just in case one platform should go down, leaving you unable to access your account.
Secondly, when it comes to brokers, I’m a bit promiscuous.
I’ll jump into bed with whoever’s offering an extra £100 top-up… whoever will save me a few points on my spread… or whoever has the latest whistles and bells on their website!
Just as we need to be switching our energy companies, our bank accounts, and our car insurance, we should also be shopping around for our brokers, and chasing the best deals.
Fortunately, with brokers we’re not forced to pick just one – we can have a choice of accounts on the go at any time. And opening an account these days is done in just a few clicks of a mouse.
Please watch out for my series of emails over the coming weeks, profiling my preferred brokers – what they have to offer you; and why you should consider opening an account with them…
What to look for in a broker
Spread prices: The cost of the spread is the difference between the price you buy at and the price you sell at. This is the cut that your broker makes on your trade.
Markets available: Obviously, you’ll want to know that the markets you want to trade available on the platform you want to use.
Features: This is all the whistles and bells you get – the free education; the technical tools you can use on your charting package; the automatic alerts you can set up…
Rolling costs: If you’re running your trades over from one day to the next, you’ll be charged an overnight funding. In theory, this should only be the case on a ‘buy’ bet (in fact, they should be paying you if it’s a sell trade – but don’t expect too much!)
These charges can vary enormously from one firm to the next. If it applies to the kind of trading you do, make sure you know what you’re being charged.
Margin requirements: Different brokers calculate margin requirements in different ways. Depending on how you trade, this could affect your choice of broker.
For example, if you hedge your trades, rather than using stop levels, you’ll find that some brokers will demand enormous margin requirements (as they won’t recognize this as a risk limiter).
Reliability: It’s no good having a fantastic, cheap platform with all the latest indicators and alerts if it keeps going down and not responding at key moments that you want to open or close trades. Fortunately, these kinds of problems are a lot less common that they used to be.
Why it matters which broker you use
I know that I bang on about this way too much, but genuinely: getting the best deal from your broker is the easiest way to boost the profitability of any trading strategy.
Saving a pip on your spread… cutting charges… these really can make a huge difference to your profit curve.
It wasn’t that long ago that the choice between cost and reliability was one of extremes. You could have a slick, professional expensive broker or you could have a cut-price one whose platform cut out all the time.
Over the past few years, that has changed.
A huge amount of competition has come into the market, which has forced the cut-price brokers to raise their game. And it’s forced the big boys to be more competitive.
For the trader, it’s a great result: we’re getting better service and we’re paying less.
Please remember to watch out for the first in my email series on preferred brokers next week.