Introduction
Choosing an online stock broker can be difficult and overwhelming at times. People new to stock trading and investing have many choices and options to consider. Finding the right online broker to meet your needs or requirements can be very rewarding and beneficial, for your portfolio and your peace of mind.
Here are some basic things you will need to consider when you look at difference online brokers. If you are not sure what these options and features are, you can speak to a representative of an online broker firm, or you can leave a comment and we’ll do our best to answer your questions.
Commissions
All brokers charge commissions fees. Commissions fees are the cost to buy and sell stocks. You are charged a commission fee twice: once when you buy a stock, and again when you sell that stock.
I believe all brokers charge higher commissions when you phone in orders and speak to a human being. Keep this in mind as these commissions are for orders placed online only.
- Scottrade: $7 per trade
- TD Ameritrade: $9.99 per trade
- Interactive Brokers: varies, minimum $2
- E*Trade: $19.99 per trade
Minimum Initial Deposit
The minimum initial deposit for online stock brokers ranges from $500 to over $10,000. For those with less initial trading capital, lower minimum deposits are generally the deciding factor.
If your account balance is less than this minimum, your broker may charge you a fee every month or every quarter. These fees usuall range between $10 to $20 per month or per quarter, but can be higher. Read the fine print if you plan on depositing the absolute minimum capital in to your account.
- Scottrade: $500 minimum deposit
- TD Ameritrade: $2000 minimum deposit
- Interactive Brokers: $2000 minimum deposit
- E*Trade: $1000 minimum deposit
Features
All online brokers have a set of features and tools included with your online trading account. The default set of tools include streaming charts and streaming data, which is usually in the form of an application called a streamer. Your streamer allows you to see the latest real time prices of stocks in your watch list or portfolio. Some streamers simplify the process to buy and sell stocks so you will not have to load up a separate web page to place your orders.
Most brokers also have additional features which are not included in the basic trading account. These additional features have additional costs. Level 2 data and real time streaming news generally fall in to this category and have additional monthly fees.
Popular features offered by online brokers include:
- Streaming Charts
- Streaming Data
- Analysis Tools
- Streaming Real Time News (may cost additional fee)
- Level 2 Data (may cost additional fee)
Local Offices
Some online brokers have local branch offices some U.S. cities. Some traders and investors may want to sit down and talk to their local broker representatives. In this case, choosing an online broker with a branch office close to your home may be the deciding factor for you.
Scottrade has very many branch offices all across the US. TD Ameritrade also has branch offices in some cities and the number appears to be growing. I do not believe E*Trade has any branch offices.
My broker, TD Ameritrade, has an office in my city, but I have never visited them. A local branch office was not a deciding factor in my choice of an online broker.
Popular Online Stock Brokers
Here are the most popular and respected online stock brokers. This list may be incomplete or your favorite broker may not be included. These are the brokers I am either personally familiar with or have heard good things about from my trading and investing friends.
- TD Ameritrade – my online stock broker
- Scottrade – my old online broker
- E*Trade
- Interactive Brokers
Rate Your Stock Broker
You can now rate your stock broker at the Trading Winner Stock Brokers page. Rate your broker and tell us what you think about them.
So what made you switch to ameritade?
Good articles. Why TD Ameritrade over Scottrade? What have you heard about Interactive Brokers?
I am moving my accounts after being with them for about 5 years. I had 14 trades that I did not do in my IRA account with them and I didn’t have orders in GTC for them either. When I told them it may have been a software problem on their end or the security on my account had been comprimized. They froze my account from trading, not allowing my to buy back the sold stock thus causing losses as the stocks went up and loss of dividends as well. After 10 days of being frozen during their investigation, they said the same thing they said the second day that the trades came from me with no proof (i.e. IP address) that they had. They also would not pay for any losses as a result of the freeze. I know their software is not flawless as sometimes when I use their options trader to trade, it trys to buy or sell stock instead of options!
Hi Shawn,
The primary reason I switched from Scottrade to Ameritrade was that Scottrade charged higher commissions for limit orders. Limit orders are where you specify the price you wish to buy and sell a stock at. Scottrade had $7 market orders, in which you get the current going market price. Scottrades limit order commissions were something like $12.50 + 1/2%, per order, which was cheaper than Ameritrade’s flat $10.99 fee.
Earlier this year or late last year Scottrade changed their commissions fees to include limit orders in the $7 fee. I have actually considered re-opening my Scottrade account as $7 is a pretty low price. If I did re-open my Scottrade account, I would still keep my TD Ameritrade and just have both.. perhaps using one for trading and one for longer term investing.
I also was not too happy with Scottrade’s streamer app. It was very weak in my opinion. Ameritrade’s was a lot nicer to look at and use in terms of simplifying order management and viewing information on stocks. I had Scottrade years ago and I hope they have since upgraded their streamer and client website, making them more user friendly and “prettier”.
Best Regards,
Nick
Hi Bob,
Please see my above comment regarding Scottrade vs. Ameritrade.
Regarding Interactive Brokers, I have heard very good things about them. I like they way they do commissions and I really like API access for programmers to interface directly with their system. As a programmer, I think their API is something I would take full advantage of.
Once I have more capital available, I plan on opening an Interactive Brokers trading account. I will not get rid of my TD Ameritrade, account, though. I have Ameritrade Apex which gives me free extras, like Level 2 data, streaming real time news, and other extras.
Hope this helps!
Best Regards,
Nick
I am an active daytrader and I am using scottrade’s elite platform. I don’t have many complaints about scottrade. I’ve used Ameritrade before (and still have an account with them). For trading sizes at 1000 shares or more at a time, it’s cheaper than the per-share commissions of, say TradeStation and the like. There are people that say they cheat you out of a cent on orders by outsourcing their order flow, and all I can say is sometimes it does seem like that’s happening, but other times my fills are instantaneous.
The biggest downside to scottrade right now, in my opinion, is you have very little flexibility for trading options. I don’t expect someone like scottrade to allow me to write naked options, but they won’t even allow vertical or calendar spreads, for instance.
The second biggest complaint I have, is that you can’t tell how many shares (if any) are available for shorting without just trying to make the trade. That means wasting a fair amount of time waiting for a great setup, only to find out that your order won’t go through. In general, though, it is rare when I can’t short a stock. They have pretty good short inventory.
At some point, I will get the energy to switch to Tradestation or CyberTrader, but scottrade is good enough that it hasn’t overcome my laziness to switch. I do this for a living, so I can’t think of any casual traders that wouldn’t be satisfied with scottrade.
I want to know why you switched
So, it seems you need to be rich to even think about getting into stock. That’s rather disapointing.
You can actually try to call Ameritrade and tell them to match Scottrade’s $7 commissions, especially if you threaten to close your account. This worked for me and I now pay $7 commissions.
Hello there,
Very nice article. I’d like to share my own experience.
I am a customer of Interactive Brokers, and I can say they are the best in the market for the small trader. This is because of their price policy based in a per-share basis rather than a flat price per trade.
I see a little mistake in the information on IB: Their minimum is US$ 1, not US$2. For trading options, they are also the best: They charge a 0 base plus 0.75 per contract (minimum US$1). Great again for the small trader.
When I started with IB, the minimum to open an account was US$2,000. Now it is US$5,000. Some people find IB unfriendly, and with poor customer service. I don’t, indeed, they have always answered my inquiries promptly and accurately. However, their Trader Workstation requires some time to master it. But they are always improving it — they even have a page to allow you to propose new features and even vote on others’ proposals.
A new kid on the block that worth to look is Zecco.com.
They charge you zero for trading stock, and for options is US$3 base + US$0.6 per contract. If you don’t plan to trade options, Zecco is very interesting. I haven’t tried them yet, thou.
I actually performed a little research and posted it in my web page.
http://www.thesmalltrader.com/Choosing_a_Broker.html
Good trading to all!
Sogoinvest is offering stocks at $3. Best online stock broker i have found.
If you are looking for occasional low cost trades, either MBT or IB are OK
– I’d select IB because they are well capitalized & offer extras, after hours trading, in-house clearing and are market makers (Timber Hill) which can aid in execution at best price.
As always, your experience a broker will vary & execution price should only be one factor. As an example, I had a Scottrade account and experienced a large loss when they failed to execute the limit order properly then held the stock in a frozen state for months. THIS DISASTER was met with a non-responsive customer service department .
I WOULD NEVER RECOMMEND SCOTTRADE TO ANYONE !
I have been with Scottrade for abou 10 years now. I have never had a problem with them. They can be a little limited when it comes to derivatives such as options, but I like the ability to also go to a brick and mortar site if I need to.
Great post, thanks for the info
tradeMonster – would NOT recommend. Not honest as to policies & ripoff charges. Avoid.
It seems that you’ve put a good amount of effort into your article and I demand a lot more of these on the World Wide Web these days. I truly got a kick out of your post. I do not have a bunch to to say in response, I only wanted to register to say exceptional work.
I am to leave TD Ameritrade as soon as I find a replacement. Of that class of stock company, not to go bankrupt, who do you recommend? Buy/Sell for 2.95 each is the lowest I can find generally, but have not selected a company. Any suggestions? Minimum is not a problem. I am an active trader. thanks tom
The business brokerages network will give you access to a big pool of people who’ve the details about businesses for sale and buyers or investors looking for any company venture. By making great use in the information you’ve, you might be cutting a provide and make a handsome profit out of the transactions.
I’ve been with Scottrade for 2 months, Its amazing, never had nay problem. $500 to start, super secured, excellent customer services, $7/trade
What does it mean when it says seven dollars a trade? if I buy a thousand shares of stock at one time and of one company is that 1 trade?
Sean,
Each time you buy stocks or sell stocks you are making a trade. Buying is 1 trade and selling is a separate trade.
You can buy 1000 shares at one time and that would be considered 1 trade. Then when you sell those 1000 shares at a later date, that would be a second trade.
So to buy AND sell 1000 shares would require 2 trades, and each trade would cost $7, or $14 total for 2 trades.
I hope that helps, but please do let me know if you have any other questions.
Cheers,
Nick
thanks
Which companies let you do the stop loss order at same time you do buy order?
When choosing a brokerage account. I first decide who will fill my needs as a brokerage. What am I looking for in a broker? WHat are my needs? Do I only want a broker with cheap trades? DO I want a local broker if I need them in person? Are they a small company? How long have they been in business? Are they trustworthly? Do they have fast money moving availablity? (In case the market goes down 500 points today, can I buy now if that would happen)
I looked at all brokerage online and off line. I decided to go with Scottrade. THey have all I wanted from a brokerage account and the trades where cheap enogh for my trading paterns. (only less than 10 trades a month at the most, I’m not a trader, I’m an investor that buys good companies every month) SO that being said, I went with Scottrade. I really like their new site and their new streamer. (free streamer with every account)
Scottrade has a new referral code: IXFV9382 that will give you 3 free trades when you open any type of account at SCottrade.
Good for 2011 and beyond. Never expires.
Happing Investing…. Don’t buy junk…. Buy quality…
Dave
do u have to be rich to get started in the stock market or can a poor trk driver get started and work his way up to buying more stock and making more money
For me, anybody could invest in the stock market as long as you have proper knowledge and aware of the risks before you start.
In the Philippines, I use Philstocks.