One of the most important considerations to keep in mind when you are searching for an online broker to trade with is how much it will cost you to trade with it. After all, what’s the point of meticulously planning and carefully executing a trading strategy if your profits are going to get eaten up by excessive trading fees?!
Choosing a broker that has a transparent, fair and competitive pricing structure is important to making the best of your online trading experience.
An increasingly popular category of online brokerages that has emerged in recent years is the discount broker. This type of broker offers rock-bottom pricing, which might be low or no fee depending on which one you choose.
However, although you might have been tempted by a discount broker in the past, you might also have wondered whether the promise of low fees is too good to be true.
In this article, we will provide you with some of the most important information you need to know about discount brokers. Once you are armed with this information, you will be able to make a better, more informed decision about whether a discount broker is right for you. With that said, in this overview of the best discount brokers we will look at the following:
Degiro is a ground-breaking online broker known for bringing incredibly competitive pricing and commission structures to the European market. It offers a seamless online trading experience, a transparent pricing structure, and excellent trading conditions. Trusted by millions of users across Europe, Degiro is a great option for novice and intermediate traders alike.
With more than two decades behind it, there are few online brokers that have helped to change the industry to quite the same extent as Libertex. Libertex is an online stock and CFD-focused broker that provides trading services across numerous different regions and continents. It is known for its competitive pricing, the variety of products it offers, and its streamlined user experience.
For Australian traders in particular, IC Markets is one of the biggest and most popular online brokers to come out of the Asia-Pacific region. IC Markets trades monthly volumes worth well over $1tn and currently has a client base in the hundreds of thousands of users. IC Markets is also very competitive when it comes to the fee and pricing structure. Users can get access to raw spreads, which offers extremely competitive pricing.
IG is a global leader in the online trading and investment space, and thanks to a number of prominent sponsorship deals signed in recent years, it is currently one of the most popular brokers in Europe. IG has a long history of providing trading and investment services to retail investors. It is the broker of choice for hundreds of thousands of traders across the globe for its transparent and competitive pricing, excellent trading conditions, wide market coverage and overall trustworthiness.
Swiss Markets is a forex brokerage founded under the BDSwiss corporate umbrella. Swiss Markets was set up in 2016 with the aim of providing a safe, transparent, and reliable brokerage offering excellent trading conditions. Swiss Markets has also proved popular due to the extremely open and transparent fee and pricing structure. The broker offers a range of different account types, each of which has a pricing structure attached to it.
Perhaps the most obvious benefit of using a low-cost or discount broker is the savings you will make on any fees or commissions you might get charged for making trades. If you are a trader processing a high volume of trades on a daily, weekly or monthly basis, then this will be a welcome benefit!
Many premium brokers will charge fees on a per-trade basis. If you intend on processing a high volume of orders, then this will add up over time and eat into any profits you are hoping to make.
Another benefit to using a low-cost or fee-free discount broker is that it simplifies the ordering process. Rather than wondering how much each trade is going to cost you, the fees are already built into the pricing you get offered. This can help to really simplify the process and to save you from any unwanted maths!
Despite these benefits, there are some negatives associated with low-cost brokers. Most notably, the fact that the broker offers trading on a fee-free or low-fee basis means that the costs incurred by the broker for processing a trade will have to be made up elsewhere.
This is most often done by building in fees and charges into the prices you get offered for particular instruments, which will often be slightly above the going market rate. For casual traders with a lower trading volume, this might work out perfectly. However, for more advanced traders with a higher volume, this could add up.
Another disadvantage to this is that the prices tend to fluctuate more when compared to premium brokers offering prices closer to the market averages but adding in a set trading fee. Whether or not this suits you will depend on the type of trader you are! More casual traders might prefer the low-cost model where no direct trading fees are charged, whereas more advanced traders putting through a higher volume of orders might prefer to pay a set fee on a per-trade basis.
The term ‘discount broker’ is typically used to refer to a broker that provides extremely competitive pricing. It is most often used to describe the fees and commissions that a broker will charge users for each trade they make.
Discount or low-cost online brokers turn a profit in a number of different ways. Most often, this will usually come via a ‘spread’, which is the difference between the going market rate for an instrument and what the end user will be charged. Brokers also generate revenue via non-trading fees such as transfer fees, deposit fees, overnight fees, inactivity fees or other miscellaneous maintenance fees. Brokers can also charge fees for margin traders.
Previously, there was a perception that discount brokers offered a much more stripped-down service when compared to full-service brokerages. As more and more brokers have entered into the market, however, this gap has gradually decreased. Many discount brokers offer an equally wide range of services as ‘full-service’ brokers – they just have a different way of charging for it. With that said, the main difference will generally relate to the costs you will incur when trading with them.
The amount that a discount broker charges you can vary quite widely. While some brokers provide a commission-free trading experience, others will charge a flat fee on a per-trade basis. The fees you get charged will also vary depending on the type of instruments you want to trade and the volume of trades you aim to make.