Last week, we had discussed the selection of a broker. To take this forward, here's a guide to help you choose between the online and offline broking modes.

Going online

If you are looking at opening an online trading account, first find out which banks your prospective broker has tie-ups with. Typically, an online trading account is linked to a depository participant (DP) and bank account. If you do not have an account in one of the banks your broker has tied up with, you may need to open one. You can also consider opening a three-in-one account offered by some brokers, where all the three accounts are opened with the same organisation. This not only helps in transferring money quickly but also in redeeming the sale proceeds when you sell stocks from your portfolio. This means you can wire the funds just minutes before the purchase. Know that some broking houses even offer interest on un-utilised cash margin!

However, the two most important aspects that determine the effectiveness of e-broking platform are the trading software and customer service levels that the broker provides. To begin with:

Understand how to place orders, modify and cancel them.

Learn how to verify your ledger balance, get details of transactions and, in general, learn to navigate through the software.

Get a grip of the nuances of transferring money online — both to and from the trading account.

In short, make sure you get a good demonstration of the trading software from your relationship manager before you start trading. The customer service team plays a key role in redressing any problem. Speak to the customer service personnel to get an idea of their competency.

Also find out from your prospective brokers on how they usually handle a `market meltdown'. This occurs when the market rises or falls rapidly and the broker gets loaded with orders 5-10 times the size of normal orders. In such cases, the broker should provide you with an alternate means of placing orders. Most brokers offer what is called phone trading to help their clients during such an untoward exigency. However, these phone trading options are mostly charged.

Also find out if the broker will give you an option to place “after market orders” before the market opens for the next day. Use this option to place your order the previous day itself if you foresee a busy day ahead.

Get details regarding the various trading products offered by the brokers and find the one that suits your profile. But, most important, make sure you can access your trading account from your office during market hours, since some organisations block access to such accounts for security reasons. Even so, don't worry, there's the option of mobile trading too.

Staying Offline

An offline account is the traditional broking account, wherein you place orders with your dealer either by walking to the office or over the phone. Traders and high net worth individuals with a need for fast and professional execution of orders can consider such options. Since the dealer plays a key role in this model, find out if your dealer is good at execution of orders and how pro-active he or she is in information sharing. Remember the dealers' experience in the market is also a crucial factor.

Know that you can also negotiate on the trading exposure and the fee that is charged. Unlike the online model, offline brokers are more flexible with the exposure and the brokerage charged.

But come what may, stick to brokers with established credentials only.

Related Topics
comment COMMENT NOW