Compare Online Trading Platforms

How to choose an online trading platform - ten things you need to consider

When choosing an online trading platform, it’s worth considering more than just the fees and charges. Here's a ten-step guide to the major points you should consider to help find a good trading broker.

1. Choose a broker that offers all the markets you want to trade

When choosing an online broker, you first need to think about “what” you want to trade and “how” you want to trade it. If you only want to trade the most popular forex pairs, you will have a larger choice of brokers than if you want to trade stocks as well. However, online brokers that only offer a small selection of markets mean you may miss opportunities to trade other assets such as international stocks, minor forex pairs, fledgling indices, and ETFs.

When looking for a broker for online trading, there is not really a single solution or one broker that is better than all of the others. Certain brokers are better at and offer different features than the others, meaning the best broker can depend upon what you want to trade.

The main markets for online trading are:

• Forex
• Indices
• Commodities
• Treasuries
• Stocks

Some brokers will only offer access to the top ten traded instruments in each market, whilst others will offer thousands of instruments in each asset class. However, the brokers that have a smaller market coverage may be cheaper for those markets, compared to brokers that offer a wider selection.

You will have to weigh up whether you will stick to a small universe of the most popular traded assets on discounted rates, or if you are happy to pay a little bit more in trading costs to have the flexibility to trade everything from one platform.

Forex trading

Forex trading is one of the most popular forms of online trading, with EURUSD, USDJPY and GBPUSD being the most commonly traded currency pairs. The currency markets are the largest in the world by traded volume but are also one of the riskiest and hardest to understand.

Understanding how to trade forex before you begin is very important to your success, and knowing the potential risks and rewards of currency trading in advance can help you to plan your strategy effectively.

Choosing a forex broker is an important step, and using our forex broker comparison can help you understand the different features each currency broker offers and how to choose the one that is right for you.

Index trading

If you want to speculate on the price of global stock markets, index trading combines stocks and indices so you can effectively trade multiple stocks at once with a broker that offers indices trading. Our comparison can help you find the best broker to trade indices.

The most common indices for trading are the FTSE 100, DAX 30 and S&P 500. For more information, read our how to trade indices guide to see why the FTSE 100, DAX 30 and S&P 500 are so popular.

Commodities trading

Whilst commodities were the original markets for farmers to lock in prices for their upcoming harvests, commodities trading is now accessible to many online traders.

Trading commodities has its own pros and cons, and understanding the best commodities to trade and how to do so effectively can help your trading. Commodities brokers vary in what they offer for private clients and professional traders. Our commodities broker comparison shows you clearly what features each commodities broker offers, how you can trade commodities, and can help you decide which is the best broker for your needs.

Treasuries (fixed income trading)

There is a big difference between investing in fixed-income investments like bonds and speculating on interest rates. Treasuries can be traded through futures, options, and CFDs, mainly by professional speculators based on economic events.

Understanding this difference and knowing the pros and cons of bond investing upfront can be important to your success. How to invest in bonds explains more. Use our bond broker comparison tables to choose from a list of UK regulated brokers.

Stock trading

Also known as equities or shares, stock trading is probably the easiest type of online trading, as the companies that form part of the major indices are well known, with an almost constant newsflow and regular market updates and results announcements. To understand the key elements of stock trading, read how to invest in stocks and use our table to compare stock brokers to see which brokers offer the most comprehensive stockbroking service.

Cryptocurrency trading

It is no longer possible to trade cryptocurrencies through spread betting and CFDs as the FCA has banned crypto trading. However, you can buy and sell cryptocurrencies without leverage through a cryptocurrency exchange. Be careful though as cryptocurrencies are an unproven and unregulated asset class and extremely high risk.

2. Choose a broker that offers the right way for you to trade

Once you have decided what you want to trade, you will also need to think about how you want to trade it. There are many different ways to speculate on the market and all come with different features and benefits.

The main ways to speculate through online trading are:

• Physical investing
• Financial spread betting
• CFDs
• Futures
• Options

Some brokers will only offer one of these types of trading with discounted rates, while others may offer all of them but be slightly more expensive.

Each different type of trading has its own advantages and disadvantages. For example, the main advantage of financial spread betting is that profits are free of capital gains tax. The disadvantage, however, is unlike DMA CFD trading and physical investing, you cannot work orders inside the bid or offer, so strategies such as scalping are not as effective and net costs can seem a little higher.

Physical trading

Physical trading simply means buying shares outright, usually for the purposes of long-term capital growth or investing for income from dividends. Compared to trading on margin, physical investing is considered lower-risk than spread betting or CFD trading. However, it is important to note that all investing comes with risk, no matter how safe it may seem.

Different types of investing platforms offer different features, fees, and have their own advantages. Compare investment platforms to choose an investment broker that is right for your needs.

Financial spread betting

Financial spread betting is a type of financial trading that is technically structured as a bet and therefore not eligible for capital gains tax. This means that any profits you make through financial spread betting are tax-free. However, where there are potential tax advantages, there are also high chances of losses, which can exceed your initial deposit.

Find out more about how to spread bet and find a spread betting platform that is best for you from our comparison tables.

CFD trading

CFDs or Contracts for difference are similar to financial spread betting as they offer leverage but include advantages such as direct market access. CFDs do not have the tax benefits of spread betting and are a global trading product. Understanding how to trade CFDs successfully before you begin can help you to avoid making costly errors. CFDs are generally suitable for more sophisticated investors, and choosing the right CFD broker can also make a big difference to your CFD trading success.

Futures & Options trading

Futures and options are more for professional traders and investors, as the minimum lot size of a future can often be in the tens of thousands of pounds. They are also more popular for US traders, where financial spread betting and CFDs are not permitted.

Buying options enable you to limit your risk on a trade to the premium you pay. However, writing options can also result in unlimited losses, so the criteria for being allowed professional trading accounts are quite stringent.

There are differences to consider, so read our how to trade futures and how to trade options guides, which explain the nuances of the trading types.

For more information on futures and options accounts, compare options trading platforms through our comparison or check and compare futures brokers.

3. Choose a broker that is right for your level of trading experience

The different ways to trade tend to revolve around how much experience you have, and it’s vital that you choose a broker that offers the right type of trading and markets for how experienced you are. If you are a beginner, you should consider starting with low-risk investments through a stockbroker to gain experience before moving on to riskier asset classes like leveraged trading.

Whenever you open a trading account to trade derivatives products like CFDs (Contracts for difference) of financial spread betting, you will be asked by your broker to take an “appropriateness test” during the account application process. This is to make sure you understand the risks of trading on margin before you can have an account. It is required by the regulator and designed to stop clients without enough experience speculating with too much risk.

When private clients trade online, they are split into two different categories – Retail or Professional.

Retail trading accounts

Retail clients are normal people who want to speculate on the markets and have a good understanding of the risks involved and how leveraged trading works. The regulators ensure that normal people have their margin capped (so they cannot inadvertently get too much exposure to the market) and also have negative balance protection in place, which means you cannot lose more than the money in your account.

Professional trading accounts

For clients that are more experienced, some brokers offer the option to apply for a “professional account”. Professional trading accounts offer greater leverage (so you can trade more with less), and in some cases, discounted fees. However, there are disadvantages to them as some do not come with negative balance protection. To qualify to trade with professional trading accounts, you will have to prove that you can answer yes to two of these questions:

1. Has your trading averaged 10 significantly-sized leverage transactions per quarter over the last 4 quarters?
2. Do you have a financial instrument portfolio, including cash deposits, exceeding €500,000?
3. Have you worked in the financial sector in a professional position, requiring knowledge of derivatives trading, for at least a year?

4. Choosing a broker that is appropriately regulated for your type of trading?

One of the most important things about choosing a broker for online trading is ensuring that they are properly regulated for the type of trading you want to do.

All trading platforms in the UK must be regulated by the FCA. You can look up whether a broker is regulated by searching the FCA register. The FCA register keeps a record of all regulated persons and firms in the UK, as well as what financial services and products they are allowed to offer.

Regulated trading platforms must display the fact they are regulated and also appropriate risk warnings that display the risk of the products that they offer.

If you need a broker that allows you to trade on markets based overseas, many UK-based brokers will offer this service. You do not need a US-based broker to trade US stocks. For example, the brokers we compare in our US trading for UK residents table all allow clients to trade CFDs on US markets if they are based in the UK.

If you are based in the United States and want to open a trading account, you can compare brokers here on our US broker comparison.

5. Ensuring your money is safe with an online broker

When comparing brokers for online trading, always make sure that the broker you are considering is regulated by the FCA, as some of your funds will be covered by the FSCS deposit protection scheme should your broker go bust. Beware that even the biggest brokers in the world can become insolvent, so it’s imperative that you understand how FSCS protection works and if you fall into the type of trader that is covered.

As with trading how and what you trade, all brokers are not regulated for the same things. Some are only regulated for professional clients and others are only regulated for private clients. Whilst some are only able to deal with other institutions and not individual traders at all.

Whilst professional categorised clients can get better commission rates and more leverage, they do not get the same level of protection as retail clients.

6. Choosing a broker that transparently explains the costs of online trading

Comparing the costs and fees of brokers for online trading is not as easy as you’d think. Neither is it simply about just finding the cheapest broker. Brokers charge in different ways, so it makes direct cost comparison difficult.

Even if cost comparison were simple, choosing the cheapest broker may mean you don’t get the best broker for your needs. For instance, one CFD broker may charge commission by widening the spread around market prices, whereas another may give you the underlying price, but charge a commission on top.

Minimum deposit levels and account inactivity fees are all costs you may have to face too, so finding these out in advance can help you realise which brokers offer the cheapest trading for you over time. The actual rate you are charged can be hard to calculate if the spread is being widened, but it makes calculating your P&L easier. However, with DMA CFD brokers, you can trade at better prices but will have to include commission costs as a separate line on your trading P&L.

The most common types of fees that online trading platforms charge are:

• Widening the bid/offer spread
• Commission charged post-trade
• Financing on overnight positions

You also need to be aware that if you are trading an OTC (over the counter) product like CFDs, FOREX, or spread betting, brokers may not hedge your trades in the underlying market. This basically means that they think your trades will be losers, so they accept your trade more like a bookie than a broker.

This is called the B-Book. There is a big debate about whether brokers hedging positions or not via the B-Book is a good or bad thing. In some cases, it is good because it reduces the need for brokers to widen the bid/offer spread, meaning that clients get better prices. However, some argue that it is bad because there is a clear conflict of interests as these brokers make money when clients lose.

Ultimately, whether clients make money or lose money, trading the market has little to do with how different brokers hedge their exposure, but rather more to do with the decisions that traders themselves make.

7. Choosing a broker that gives you advice and trading ideas

If you are looking for a broker to help with trading ideas, you need to be very careful. Whether or not you use the suggestions made by your broker, a broker's recommendations should depend significantly on how much of an experienced trader you are.

Online platforms that offer trading to retail customers are not allowed to provide trading ideas, advice or anything that can be considered implied advice. We’ve covered in detail why you shouldn’t use advisory CFD brokers and why most trading educational courses are a waste of time.

You should not rely on others to help you make decisions in high-risk trading products like futures, options, CFDs and spread betting. Advice from wealth managers structuring your investments in a tax-effective manner through SIPPs and ISAs is one thing, but if you are a retail trader and a broker is phoning to pitch trading ideas, you should report them to the FCA.

Professional and institutional clients are allowed to discuss the markets and get advice from their brokers. This is because they have been appropriately classified as traders that fully understand the risks involved in the markets and leveraged products. Caveat emptor is a phrase that still applies to this, as trading is a self-directed form of speculation.

8. Testing a broker's trading platform with a demo account

One of the easiest ways to compare trading platforms is to open a demo account before you apply for a full account. Most demo accounts will give you a good idea of the look and feel of a broker's trading platform and usually come with some virtual funds to trade with. Demo accounts allow you to test order tickets, layouts and the trading tools that are available on the real platform.

Comparing demo accounts for trading is quick and easy to do as most provide almost instant access after confirming your details via email. Be aware that brokers use demo accounts as a lead generation tool to convert prospects into real traders. However, most salespeople at respectable brokers are very knowledgeable about the technology on their platform and are more than willing to talk to prospective clients on the phone, via email or in-person about the features on offer. One point to note though is that if a salesman is too pushy, that should be a warning signal that they are best avoided.

9. Choosing a broker that offers telephone trading as well as an online platform

Whilst most traders will choose a broker based on their ability to trade online, having an experienced dealer who can execute trades for you whilst you are not in front of a computer can be very important.

Some traders still prefer to trade over the phone, and those that do may form very close relationships with their dealers. Some traders talk to their brokers more than anyone else, so making sure that any broker you choose has a good desk of experienced dealers is vital.

Dealing over the phone is also handy if things go wrong and an error needs sorting out or if you have a particularly complicated strategy to execute that requires cross margin calculations that cannot be done online.

Voice brokerage is usually more common at prime brokers for professional and institutional traders, where hedge funds want to reduce the risk of trading errors by getting their traders to give orders over the phone or messaging systems rather than do it themselves. If you ask a dealer to execute a trade for you and they do it wrong, they will have to make good on what you asked for. Whereas if you are trading yourself online on a dealing platform and press buy instead of sell, you only have yourself to blame.

10. Choosing the best broker for online trading

Deciding which online broker is best for you depends on so many factors that it is difficult to give a generalised answer to which broker is best. However, by considering your needs, features and services like trading assistants and tools that are important to you and your strategy, as well as considering the points discussed here like regulation and market types, you are more likely to choose the best broker for you.

Our industry survey and broker reviews can help you find out what other traders like about the brokers you are considering, what popular features they offer, and which brokers offer award-winning customer service or trading platforms.

If you are a beginner, you should be very careful when choosing a broker because trading online is very risky. Before you choose a broker, make sure you have read all of our reviews, which include client satisfaction surveys and feedback from real traders.

Online Trading FAQs:

What is online trading?

Online trading is a form of high-risk investing where investors speculate on the short-term price movement of global markets such as stocks, forex, commodities, indices and treasuries.

What do you need to start online trading?

To start online trading, you need an online trading account, funds to trade with, and an understanding of how the financial markets work.

What is the best online trading platform?

To find the best online trading platform, compare brokers in our online trading comparison table.

What are margin rates in online trading?

Margin rates are the amount of leverage you get when you trade. For example, a margin rate of 10% in share trading means that you can buy £1,000 worth of shares with a £100 deposit, the equivalent of 10 times leverage.

Can I open a trading account online?

Yes, all the online trading platforms in our comparison tables offer online account opening.

Can I make money trading online?

Yes, it is possible to make money trading online. However, online trading is a very high-risk form of investment, and only around 20% of online retail customers make money trading online.

Is online trading safe?

As long as you are classified as a retail trader and use an FCA-regulated broker for online trading, your money is protected up to a certain amount by the FSCS.

Is online trading legit?

All legitimate online trading platforms in the UK are regulated by the FCA.