Best Online Trading Platforms Compared

How to choose an online trading platform

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.

Ten things you need to consider when comparing online trading platforms are:

1. Market access
2. Account types
3. Risk appetite
4. Regulation
5. Safety of funds
6. Transparent costs
7. Added value, analysis and education
8. Demo account
9. Customer support & voice brokerage
10. Margin rates

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.

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.

Compare the different types of trading platforms:

The main ways to speculate through online trading are:

• CFD Trading – Compare CFD brokers for trading contracts for difference. Make sure you understand the risks and potential rewards with our guide on how to trade CFDs
• Financial Spread Betting – Compare financial spread betting brokers and find out why spread betting is tax-free with our guide to financial spread betting
• Forex Trading – Trade the world’s largest market through a UK based and FCA regulated broker in our forex comparison and get a better grasp of FX by reading our how to trade Forex guide.
• Social & Copy Trading – Automatically copy the positions and portfolios of other traders. Use our comparison tables to compare FCA regulated social trading brokers in the UK.
• Index Trading – Understand how to trade indices on the underlying markets of the largest public companies in different countries and compare brokers for index trading in our comparison tables.
• Commodities Trading – Speculate on gold, oil, frozen concentrated orange juice in our comparison table of commodities brokers and read our guide to the most popular traded commodities in the market.
• Futures Trading – Trade futures directly on exchange with an FCA regulated futures broker. Compare the costs of trading futures in our futures broker comparison and read our guide to understanding futures trading.
• Options Trading – View our comparison tables to compare the best UK based options brokers authorised and regulated by the FCA. See how puts and calls can be used in trading with our guide to options trading.
• DMA Trading – For larger more experience traders compare brokers that offer DMA (direct market access) for trading direct on the exchanges for better pricing, quicker execution and lower costs.
• Professional Trading Accounts – Compare brokers that offer professional trading accounts and see if you qualify for reduced fees and improved margin rates with our professional trading account comparison.
• MT4 Trading – MT4 (Metatrader4) is one of the most popular trading platforms across the globe. Make sure you are using the right broker with our comparison of FCA-regulated UK-based MT4 brokers.

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.

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.

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 platforms 

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 trading 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. Getting the best margin rate from an online trading platform

Margin enables traders to leverage their risk capital and get more exposure to the market. For example, if you are trading the FTSE 100 you can trade £100,000 worth of FTSE with only £5,000 in your account if your broker is offering 5% margin. The advantage of this is that you get more exposure to the market and can diversify positions. However, the disadvantage is that your losses are multiplied and if you can lose your entire account balance with small percentages moves. The FCA regulate online trading platforms in the UK for retail traders so margin rates are set and standard across most trading platforms. Generally, margin rates are:

• Indices: 20%
• Major Forex pairs: 3.33%
• Commodities: 10%
• UK & US shares: 20%

These margin figures represent the deposit you have to put down when opening new positions and are in place to protect brokers as well as clients. The percentage is set based on what a big percentage move would be in the market to ensure that clients and brokers can fund a position.

However, if you are an experienced trader you can opt for a professional account, and get better margin rates. These differ from broker to broker. You can see the current professional margin rates in our professional trading account comparison.