How to choose the best trading platform
Thanks to the increase in internet trading platforms, almost anyone can become an investor nowadays. To start trading bonds, equities, commodities or cryptocurrencies, all you need to do is register on a reliable trading platform and fund your account.
While experienced traders know exactly what to look for in such a trading platform, it’s more challenging for beginners. There are dozens of options out there, and the niche is filled with complicated terms and features that you might or might not need.
We will try to demystify trading platforms by explaining what they are and what to consider when choosing one yourself. In the end, this article should give you a sound knowledge of trading platforms, including some of their more advanced features.
What Is a Trading platform?
Online trading platforms are brokerage services that allow you to deposit funds to access a wide variety of assets. They have become the go-to solution for entering the investment market efficiently and inexpensively. Today, you can make almost any trade through an online brokerage platform. With the rise of the internet and online trading terminals, users can trade stocks, currencies and commodities from the comfort of their own homes.
Trading platforms have been around for quite some time now. The first widely used electronic trading platform was Nasdaq, which today is a regulated US stock exchange mainly trading technology-related equities. Created in 1972, it really started to take off with the advent of the internet in the mid-90s.
Today, these online trading platforms have taken over. Because most of them don’t have a minimum investment threshold, they have contributed to a huge increase in online investors. More than 10 million people registered new online trading accounts in 2020 — a new record.
Basics of Trading Platform Operation
These platforms are a great access point as they serve as an intermediary between the individual and the market. Some of them are focused on providing forex market trading pairs or stocks. Others are specialized cryptocurrency trading platforms, exclusively built for digital assets. A third type is designed to provide a platform for crypto and fiat trading, as well as tokenized assets. Currency.com allows you to trade all sorts of tokenized assets, such as company stocks, currencies, cryptos, commodities, and many more, for instance.
Moreover, trading platforms usually come with a wide array of tools to help you invest. They often include trading indicators and programs for analysis that can help you enact advanced trading strategies.
Many trading platforms also offer news feeds with relevant information about the niche they are covering, for example, crypto or US stock markets. Some even provide premium analytics from experts. These usually come at a price, so check whether they are worthwhile before purchasing.
Below are two very different types of online brokerages that you should be aware of.
Prop trading platforms is shorthand for proprietary trading platforms. These are organized by financial institutions that trade directly on the markets instead of proposing a fee structure and allowing clients to trade themselves.
In this case, banks or other big financial institutions use their own funds (hence the term “proprietary”) and their financial advantage to enter markets. So, instead of commission fees, prop platforms rely on direct profits from the trades they make.
Commercial trading platforms use the depositor’s money, meaning your money, to trade on your behalf. Most of the profits commercial platforms make are thanks to the commission fees paid by their clients.
What to Consider When Choosing a Platform?
When looking to choose your trading platform, there are a certain number of factors you should consider:
- The fees and commissions you will be paying. You will be paying a small commission for every executed trade. While these might seem insignificant at first, they will quickly pile up, which can hinder your profits. Consequently, looking for the optimal fee structure at your broker is an essential step in the process.
- Broker and trading platform reputation. Ensure you are trading with a reputable platform that has been audited and is regulated in the country of operation. Bonus points if it has good reviews online on trusted third-party websites like Trustpilot.
- Platform availability. Before depositing funds on the platform, make sure you check whether the trader platform is dependent on a particular broker. While some are independent, you will often need to sign up with a broker before proceeding.
- Regional restrictions. Ensure that the trading platform covers your region. Often, they will allow deposits but will block withdrawals.
- User interface. A good trading platform user interface needs to be intuitive and easy to navigate. It should provide a good overview of your portfolio value, profits and losses, opened positions, and an archive of all past trades.
- Additional features. Trading platforms that provide advanced charting tools are a must if you are serious about your trading venture. Moreover, analytics and news feeds can be a great addition.
- Bot connectivity. If you want to automate your trading, you might want to look into trading bots. Make sure the trading platform allows this and provides an API for automatic trading.
- Trading app. Depending on your lifestyle, a mobile trading app that allows you to trade on the go can be a great addition to your toolset.
Of course, only a unicorn platform will include all of the above features, so try to determine which are key to you and make a decision based on their availability.
Trading platforms are the best way for retail investors to enter the markets. They allow you to access almost any speculative asset imaginable: stocks, bonds, commodities, crypto, etc. Hopefully, this article has given you a good overview of what to look for in a good trading platform and how to choose one depending on your investment profile.