Which online broker is best for you depends on various factors. In order to know these and to be able to assess them correctly, we will explain all the important basics of direct brokers to you in the following sections and provide you with clear examples and useful tips. This way you can choose the right online broker well informed.
What is an online broker?
An online broker - also called internet broker or direct broker - is a service provider for securities trading and is mainly aimed at private customers. In addition to a necessary securities account, the broker also provides corresponding software solutions to place buy and sell orders on the various domestic and foreign stock exchanges as well as in direct trading.
In addition to classic shares, funds, ETFs, certificates and complex products such as options or CFDs after Exness can also be traded. The exact trading offer as well as the conditions and the trading technologies offered vary from broker to broker and appeal to different target groups.
An online broker is not necessarily a licensed bank, but can also act as an order broker and assign the actual securities account management and securities business to a partner bank (based abroad). Fintechs in particular rely on this solution, which is usually more cost-effective.
There are also major differences in the range of tradable securities. Online brokers include those providers who enable trading in classic securities such as shares and funds via an online securities account. But also pure CFD brokers, through which only derivatives and no real shares can be traded via a trading account (no real securities account), are online brokers.
Strictly speaking ...
... online brokers are only those providers who concentrate exclusively on securities trading via the internet and do not offer any other banking products.
Over time, however, the term has been applied to all financial service providers that offer an online custody account. This means that established banks with online banking and brokerage are also counted as online brokers.
Main functions of a broker
Digital securities trading is based on a few basic functions that every reputable online broker offers. In addition to the pure buying and selling of shares and other assets, this also involves the efficient management of the online securities account and the provision of current market information for well-founded trading decisions.
Classic custodian banks realise all this via online banking, modern free brokers via the respective customer account. The main functions are implemented differently, but always consist of the following features:
- Online custody account with portfolio overview
- Buy/sell area (brokerage)
- Stop-loss and take-profit order types
- Security search with filter function
- Summary of the most important securities properties
- Postbox or document management
- Securities account transfer