Page 81 - THE MARKET WHISPERER

THE MARKET WHISPERER 79

that of the broker, but of a reliable, external organization. Clients of US
brokers are meant to be insured by federal insurance up to a framework of
$100,000 in their accounts, while clients of European Union brokers enjoy
the automatic cover of the ICF (Investor Compensation Fund) for up to a
€20,000 deposit. The ICF covers all of Europe and insures every deposit up
to this figure, in every European financial organization.

Broker Support: What You’ll Get, and What You Won’t

Imagine this: the US Federal Reserve Bank publicizes an important
economic notice creating a financial turmoil. Traders, investors, institutions
and market makers stream multiple orders into the stock exchange’s
computers. The outcome: system failure and immense difficulty in getting
orders executed. This kind of situation shouldn’t bother you in any way,
unless you’re a day trader holding a particular stock and your only interest
is fleeing from it as early as possible.

But bad luck strikes: all systems are stuck and you need to call the
broker’s client service. Due to the crash, you probably aren’t the only ones
phoning your broker at that very moment: that means you’ll be spending
long Muzak minutes until call is finally picked up. Sounds like a nightmare?
Experienced traders know these and similar scenarios well.

Admittedly, systems these days are highly reliable. Such situations
are rare, but breakdowns can happen. Remember that breakdowns and
glitches are part and parcel of the life of a day trader. Try to choose a
broker who will respond quickly for no more than the cost of a local call.
That’s the kind of broker who can save you a lot of money, and help give
you peace of mind.

Summary

Whittle down your list of potential brokers according to points you assign
each one based on the following:
1. Is the broker well-known and with long-term experience, operating

according to the regulations?
2. Do the regulations under which the broker operates provide for

insurance of your money? If so, up to what amount is covered?
3. What is the minimum execution cost?
4. How much will you pay beyond the minimum? (usually a fixed price

per stock)
5. Does your broker allow you to deposit less than $25,000 and still allow

you to day trade?