Poor Relationship with Day Trading Brokers
Obvious Facts About Day Trading Brokers
This may sound obvious, but when a trader doesn’t trade, they don’t make any money. What you may not think about is the fact that their broker doesn’t make any money, either.
The best, most successful trading systems are usually accompanied with an incredible relationship with a broker. These relationships are key indicators of how successful a system can be.
If the relationship is strong, it usually means the broker is happy. If the broker is happy, it usually means the trader is making profitable trades, putting money in the broker’s pocket.
While the above scenario is true in most cases, there are still brokers who will want a relationship with traders regardless of how many trades they make. They’ll even go as far as making sure to portray inactive traders in a positive light and offer low rates in an attempt to gain client referrals.
What To Look For in Day Trading Brokers
When researching a system, there are specific things to look for to determine credibility.
For instance, some educators make more money charging you as an Introducing Broker as opposed to monthly fees. Most brokers set aside a certain amount of money for these Introducing Brokers, who in turn, are registered to profit from client referrals.
The biggest problem with this scenario is that many of these educators have relationships with brokers who pay the most for referrals, instead of brokers who will best meet the needs of clients.
Experience in this area has shown it can be a double-edged sword. One way to recognize an Introducing Broker system is to determine how conservative they are in their marketing. Everything these individuals do is monitored and regulated, so the more conservative, the more likely.
In contrast, educators who aren’t Introducing Brokers will usually identify the best places to trade because they have no incentive to lead you elsewhere.
Additional Overlooked Factors When Choosing Day Trading Brokers
Books, videos and seminars which offer full courses on trading tips and techniques are a very common education tools. Unfortunately, a lot of these resources fail to reference the steps necessary for setting up a broker account.
Additionally, it may surprise you that even some of the largest trading platforms on the planet don’t offer phone or email support.
If you’re researching a system and the educator doesn’t provide videos, ongoing support or live help in regards to setting up a broker account, the education likely won’t translate into actual trading.
That being said, the industry as a whole is getting better in this regard. Most online brokers now offer support options, but even these don’t typically cover all the bases. Before making any type of payment, make sure you’re getting more than just a generic education.
Day Trading Brokers on Taxes, Retirement Planning and Interest
You may find it difficult to locate any type of information on taxes, retirement planning and interest in day trading.
Taxes are a big part of trading. Tax implications can be significant for trader, depending on how their account was set up of course.
To combat this, many traders set up corporations to trade with. This may or may not be the right step for you. As you’re choosing a system, make sure you have information to help you navigate this.
Retirement planning goes hand-in-hand with taxes. There are a lot of ways to integrate your account with Traditional IRAs, ROTH IRAs and other tax beneficial strategic investments.
Brokers work with their type of accounts, but often neglect to mention this integration capability.
Be aware that most of these accounts require higher minimum balances to start.
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This article is only part 6.5 in a series aimed at helping day traders understand what mistakes to avoid.
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