5 Top Online Stock Brokers For 2017
Choosing an online stock broker is one of the most important aspects of trading. Here are the top brokers I’ve used and can recommend.
TradeStation have been around for many decades. They offer two pricing models. The “price per share” plan charges as little at $0.006 per share with a tiny $1 minimum. This is perfect if you scale in and out of trades frequently.
They also offer a flat rate per trade at just $5 per trade. Options are just 50c per contract.
They offer one of the most advanced trading platform around, yet despite this, it has a relatively small learning curve.
They offer a tool called radarscreen, which has very sophisticated pattern-recognising features, that can pick out high probability trading setups in real time, before other traders see them.
Tradestation have won countless accolades. Their most recent awards from Barrons were “Best for Frequent Traders” and “Best for International Traders”.
Ally Invest (formerly Tradeking) have been around since 2005 and have established themselves as a high quality broker. They have won many awards from Barrons and Smartmoney.
They are small in comparison to the big players like TDAmeritrade and E-Trade, but they are growing.
They charge $4.95 per trade for both broker-assisted and online trades.
The platform is excellent to use, the only thing missing is level 2 data, so if you need this, it may not be the broker for you.
Ally Invest has a vibrant trading community that has different sections for different ability levels. This is unique as most trading communities are aimed at inexperienced traders.
Some of the other reasons to use Tradeking include no hidden fees, no minimum account size, excellent customer service, low margin rates, no fee IRAs. Other than the no level 2 data, the only other gripe I have is the logging in procedure is very tedious and annoying.
Interactive brokers have been around nearly 40 years now.
They have a quite a steep $10,000 minimum account size, reduced to $3,000 if you are under 25.
Trading fees are either a 0.5% of the total trade value or priced by the number of shares bought/sold. Prices per share vary from $0.0035 per share down to $0.0005 per share if you trade high volumes, with a $1 minimum. So you could buy 200 shares of apple for just a dollar.
Interactive brokers are also suitable for international traders.
If you have been into investing for any length of time, I’m sure you’ll be at least somewhat familiar with TD Ameritrade. They have been around since 1983, but only started offering internet trading in 2006.
They are one of the largest discount stock brokers with over 7 million clients. They also have over 500 local branches.
Trades cost $9.95 and $44.95 for broker-assisted trades. Like E-Trade, it seems TD really don’t want you to trade over the phone. Their platform is excellent with platforms for both IPad and Iphone too. It’s worth noting that they have a minimum account size of $2,500.
What factors should I consider when comparing brokers?
Cost per trade
This is of course the most obvious one and a very important factor. The amount you pay for your trades can have a huge effect on your trading performance, especially if you have a smaller account size and/or make a lot of trades.
Let’s quickly look at the maths. If you make 100 trades per year, at $5 per trade, that’s $500 and at $10 it’s $1,000. If you have a $20,000 account balance, at $5, that is 2.5%, at $10 it’s 5%. A huge difference isn’t it?
Clearly, if you have a bigger account balance and/or make far fewer trades, then the difference won’t be so significant. Another thing, whilst the cost per trade is very important, it doesn’t necessarily mean you should just opt for a low commission stock broker, you should consider the other factors too.
Minimum Account Size
This is only likely to be an issue if you have a very small account balance. Personally, I think it may be worth saving up some more risk capital before investing in the stock market if you run into these problems as the fees charged for trades is likely to eat up too much of your balance.
I see a virtual platform as very important. Trading is far from easy, so the ability to practice our strategies can be a big help. Thankfully many of the major brokers now offer this. E-Trade is the only broker in the list above that do not have virtual trading.
Platforms vary greatly, some are very simple to use and aimed at the beginner, others are more advanced and may be too confusing for a new trader. Brokers such as Zecco have a simple platform. Optionshouse have a more advanced platform. TD Ameritrade and Scottrade offer different platforms to suit all levels of experience.
Some traders like their broker to provide them with training. Many brokers do provide this, but the standard of training is rarely any better than you can find elsewhere. It is also worth bearing in mind that if a broker invests heavily in training material, this may be reflected in the fees they charge. Our view is that you are best getting your training from online sources other than your broker from websites such as this one.
Trading forums and community
Many traders like to share their experiences with other like-minded traders. An increasing number of brokers now offer their clients a place to do exactly this with online trading communities. These communities are usually aimed at new and inexperienced traders. Zecco and Tradeking offer two of the best trading communities around.
Speed and Execution
The speed of execution can be very important. For short term investors who makes a large number of trades, the fill price is extremely important. For longer term investors fractions of a second really arn’t going to make a lot of difference.
Most online stock brokers offer access to stocks, ETFs, IRAs and mutual funds, but not all brokers offer access to options, futures and forex trading. OptionsXpress is one of the few brokers that offer all of these services.
Unfortunately if you live outside of the US, many brokers won’t accept you as a client. OptionsXpress and E-Trade both take international clients.
What about a full service broker?
In case you are not aware, a full-service broker offers clients much more than just a trading account. They often help you with matters such as:
- Help choosing stocks
- Determining risk tolerance
- Research and market analysis
- Retirement planning
- Tax planning
- A wider range of investments such as derivatives
Are they a good idea?
Our view is a resounding, no. Whilst undoubtedly some of the services they provide can be useful, the problem is the cost. Some of these brokers charge in excess of $150 per trade.
This is over 15 times more than you would pay to buy stocks with TD Ameritrade and over 30 times more than you would pay with Zecco.
On top of this, they often charge yearly maintenance fees, even if the advice they give you results in average or even poor performance. It certainly wouldn’t be quite as bad, if the high fees they charges correlated in some way with the performance, but they don’t!
By using one of these brokers, you make earning good returns much more difficult, especially if you have a relatively small account balance. Our view is stick with a discount stock broker.
With so many internet stock brokers out there to choose from, you can certainly afford to be very picky. We have deliberately only included brokers that we would use ourselves here at h1iq. Stock brokers make a lot of money regardless of whether you win or lose, so you want to be sure you are getting the level of service you require and not paying too much for them.