Cheapest Online Broker: What Is A Stock Broker?
We understand that anyone reading a guide on how to find the cheapest brokers probably has a basic understanding of stocks, shares and financial markets. But let’s briefly explain how brokers operate for all you beginners out there.
How do stock brokers work?
Put simply, online stock brokers act as intermediaries between the buyers and sellers of financial instruments, such as:
- Mutual funds
Using an online broker typically requires opening a brokerage account based on the investment options you are interested in and paying commissions and account fees for the privilege of the broker connecting you with your desired market.
How Do I Find Cheap Online Brokers?
Securing the best deals on the best cheap brokers in the UK takes a little time. In short, you’ll need to compare brokers in terms of:
How much you’ll pay on your preferred investments will vary from broker to broker.
These can also vary greatly between providers – and can sometimes be avoided completely.
The amount of money you’ll need to invest up front to get started can range from almost nothing to £500 or more.
Finding a one-off deal or promo code with the cheapest brokerage could save you some significant start-up costs on all of the above.
Whether you want state-of-the-art analytics or bare-bones trading platforms, tech levels will always affect what you’ll ultimately pay.
Before we explore each of these in detail, let’s take a look at how you can go about determining your investment needs, intentions and goals. This is crucial before you can truly find the cheapest broker for you.
Cheapest Broker: Pinpointing Your Trading Needs First
Before you dive right in and start comparing cheap online brokers, you need to first establish what kind of trader you are. This will help you to find the cheapest broker offering the services you need at the best price, and with the best tech. The cheapest broker for day trading might not necessarily be the best broker for forex, and vice-versa – so getting this right is absolutely essential.
5 Questions To Help Determine Your Trading Needs
As a new trader, you should take a little time to determine your investment goals, style and preferences – and to shape up your basic knowledge on financial markets. Here are five key questions you can ask yourself:
What trades are you interested in?
From traditional stocks and shares to mutual funds, exchange traded funds (ETFs) and fixed-income securities, different trades rely on different trade processes – and the cheapest broker UK for forex might not be the cheapest online broker for stocks, and so on. Research your target market and how it functions extensively, then pick a broker that offers good fees and commissions in your chosen field.
Are you an active or passive investor?
Are you a budding day trader keen to open and close multiple positions at a time? Are you looking to turn trading into a full-time career? Or would you rather just make one or two strategic long-term investments, and benefit passively while you work a day job? These questions will help you determine whether you’re an active or passive investor, bringing you closer towards the best cheap brokers that match your needs.
What level of support do you need?
While seasoned investors might get a kick out of interpreting charts, graphs and data for themselves, newbies usually benefit from brokerage services that offer access to support personnel and extensive online guides and resources. You should also consider the time of day you trade, whether extended-hours trading is important to you and whether a 24/7 customer support service is necessary.
What features are you looking for?
Many budget brokers offer only basic features and analytics at entry level, but as a beginner, accessing simple resources like glossaries and educational content should be enough to get you started. If you need high-level market analysis or fundamental and technical data to fuel your financial decisions, however, you should try to pinpoint which brokers are offering those specific tools as part of their standard package, or at the best add-on price.
What are your ultimate trading goals?
While there’s no proven method of guaranteeing investment returns, properly aligning your chosen cheapest broker with your investment goals is a good way to get a head start. You should think carefully about your long-term goals, whether these involve saving for retirement, enjoying a quick side hustle or working towards a new primary source of income. The best cheap online brokers will tailor their services to suit customers with unique goals such as these – so deciding on your long-term strategy will help you immensely in choosing the right brokerage to work with.
Best Cheap Brokers: Finding The Best Account Fees
Once you know exactly what you want, it’s much easier to narrow down your options, start comparing the market and find a brokerage that really works for you. But how can you actually spot the cheapest broker around? A good place to start is by looking at what each platform is charging in terms of account fees.
How do account fees work?
The standard approach among online brokers is to charge clients fees for either:
- Transferring funds to their account
- Withdrawing money from their account
How can I get the best deals?
The two types of fees listed above are charged by pretty much all the best cheap brokers on the market, but there are a few other fee types, such as annual subscription fees, customer inactivity fees and additional research charges, that you might be able to minimise by shopping around or opting-out of services you don’t need.
Sometimes, it might be possible to avoid account fees altogether by choosing the cheapest brokerage on the market or signing up for a promotion that waives fees for a limited time period for new traders. Free trials and discounted rates are not unknown – but more on this later.
Cheapest Online Broker: Understanding Account Minimums
When you’re looking for the cheapest broker, account fees are one thing, but account minimums are an entirely different ball game.
How do account minimums work?
An account minimum is the minimum initial investment amount you’ll need to deposit into your brokerage account to get trading. The cheapest online broker will usually let you set up an account with pennies, but depending on your desired market, it might be in your best interests to deposit a more sizeable sum. For example, you won’t get very far with mutual funds as a newbie unless you’re making minimum investments of at least 3-4 figures.
How much is a typical account minimum?
While some of the best cheap brokers in the UK will allow newcomers to open an account for virtually nothing, others require a minimum investment of anywhere between £10 to £1,000 or more, depending on your desired trading market and preferences. Do some good research on your target market to find out what entry level investors typically put in to get started.
Sometimes, the rules aren’t so clear cut – for example, stocks and shares theoretically have no minimum order limit through most brokers, but it’s advisable to buy blocks of stock with a minimum of £500 regardless, almost as if this is an “unwritten rule” in the industry. As with any investment, understanding your market and staying within a realistic budget is essential.
Cheapest Brokerage: Comparing Commissions
The cheapest online broker isn’t necessarily always going to be the one that offers the lowest account fees and a rock-bottom account minimum – you also need to review commission charges.
How do commissions work?
As we mentioned earlier, brokers act as an intermediary, executing buy or sell orders on your behalf. Whether you’re trading forex or bonds, most brokers make the majority of their money through commissions – which are charged per trade or spread. In this context, the term “spread” simply means the difference between your bid and ask price when executing a trade.
What commissions can I expect?
If you’re interested in options, you need to find the cheapest online broker offering the most attractive commissions on option trading. If bonds are your game, you need a broker that offers low commission rates on bonds, and so on. Commissions will vary from broker to broker and trade to trade, but the majority of the UK’s best brokers will charge as follows:
Stocks and shares
Brokers tend to charge a commission on the purchase or sale of stocks, which you’ll need to pay either per trade or per share, depending on the commission structure used by your broker of choice. That said, it’s not unknown for the cheapest broker and their competitors to charge zero commission from time to time – especially if they are trying to lure in new customers.
The best cheap brokers will usually charge stock trade commission on ETFs in the same way they do with stocks, but it’s usually possible to pinpoint individual commission-free ETFs via their platform. The best software will have a tab to help you target these kinds of funds.
These are a little more complicated. The cheapest broker UK might not charge anything at all commissions-wise for purchasing mutual funds, and indeed many brokers have adopted this no-transaction-fee model in recent years. However, mutual funds typically incur expense ratios, which are internal fees charged by the funds themselves, as opposed to the broker.
Finding the cheapest online broker for bonds can be pretty straightforward, as many brokers openly advertise commission-free variants when they’re available. That said, you may have to pay a brokerage fee for purchasing certain types of bonds – it’s basically just a case of what’s on the market.
If you’re trading options, you’ll need to get used to per-contract fees, which most brokers tend to charge at around 30p to £2.00. Look for brokers that operate either a commission-only or contract fee only model to save cash.
A big part of comparing the best cheap brokers is reviewing the market for special promotions and discount codes that could be a bargain gateway into the world of trading and financial markets.
During quieter trading periods, the cheapest broker could be the one offering free trade fees for a set amount of time. During busier periods, brokers might offer cash credit to new traders upon making a qualifying deposit, to encourage more and more people to sink their teeth into already-volatile trades.
The most common promotions you should keep an eye out for, include:
Discounts on trade fees or commissions
Over time, saving money on fees can make a huge difference – especially for long-term traders.
The cheapest broker might offer new traders fee-free periods that help newbies get a foothold in the market.
Free cash bonuses or credit
You might have to make a qualifying deposit to claim but getting a free cash bonus from the cheapest online broker can be a great way to get started with some higher-value trades.
Free trial periods on apps and special features
If you’re in it for the long-haul, gaining access to analytics tools, apps and expert commentary at a cut price can be a dream come true.
Cheapest Broker Uk: Finding The Best Tech
Last but not least, you need to think carefully about your tech needs when choosing a broker. Opting for the cheapest broker on the market fee-wise could save you money in the short-term but could see you short-changed as far as special features and apps are concerned.
The trick is to determine your needs and secure a good balance between the right tech and the lowest costs. Look out for the best cheap brokers that offer:
Finding a broker that offers videos, tutorials and in-person seminars can be invaluable when you’re new to financial trading. If these are available for free, even better.
Every trader needs a platform to trade on and brokers usually provide this as part of their basic package – but some might offer additional analytics tools at no extra cost. Be sure to check reviews of software on sites like TrustPilot to make sure you’re gaining access to the very best.
Research and expert opinions
Trading is all about speculation and making predictions, and sometimes the writings and research of financial experts are as important as analytics when it comes to identifying the right investment opportunities. Bookmark any brokers that don’t charge too much extra for access to expert analysis.
Cheapest Online Broker – A Quick Summary
So, how do you find the best cheap brokers in the UK? In summary, securing the best broker will always be a personal affair, so the key to getting the best deal is to pinpoint which broker is offering the best services to meet your unique needs at the best price.
Don’t forget to start out by identifying your trading requirements and goals. From here, the key things to remember when looking for the cheapest online broker, are:
- Compare commissions across your desired trade niche
- Make sure to get the best account fees for your trade, with a realistic account minimum
- Keep an eye out for promotions aimed at traders in your field
Keep these three things in mind and you can’t go far wrong when trying to pin down the cheapest online broker for you. Need a refresher on trading? Take a look at our latest guides where we answer popular trading questions, such as “what is a lot?” and “what is a pip?”
Cheapest Broker FAQ
💰 Which UK broker is cheapest?
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