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Which Online Broker is the Best?
You may be asking yourself the question of which online
broker is the best for me. It depends on the type of
trader that you are, but one way to look at this is
using the table below. It is an online broker
comparison using
the qualities that
are important to most people, a) Trading Fees and b)
Overall Service Quality ratings.
Once you
decide which online broker to go with, set up your online trading account in
two steps:
1) Complete an online
application (there is no cost to do this) and
2) Deposit funds into your account to use for your
trading
Information on Added Costs Per
Trade
* TradeKing -
$4.95 per trade except add $0.01 per share for stocks priced
$1.00 or less. $100 minimum per order
in OTCBB and Pink Sheet stocks.
** ETrade -
Per Trade pricing tiered from $9.99 to $7.99 based on number of
trades per quarter
*** Scottrade - $7.00 per trade
except for stocks priced under $1, add ½% of the principal
value. Most foreign and
pink sheet stocks must be traded with broker assistance for a
$27 commission.
About the Chart to Determine Which Online Broker is the
Best
This Which Online Broker Chart looks at the most
prominent online brokers from the perspective of a new trader or
experienced trader. While there are many ways to compare online brokers,
including availability of investment products, banking services
or sophistication of its trading platform, a beginner especially should be
concerned at first with cost factors and overall service quality
ratings.
Cost Factors
In order
to get a complete view of total cost when you compare online
brokers, look at all factors including trading fees (the cost
to the trader for executing a single trade, whether a "buy" or
"sell" trade. This can be misleading at first because buying a
stock and then later selling it involves two trades. So a broker
with $5.00 per trade fee will cost you $10.00 to buy and sell. A
broker with a $10.00 per trade fee will cost you $20.00. After
you sell a stock is when you determine your profit or loss and
these fees must be included in your accounting. When you compare
online
brokers, there are also
some "additional" fees that are charged based on specific types
of trades and these are outlined in the broker comparison chart above. "Per Trade"
fees may also vary depending upon the number or volume of trades
executed over a defined time period, with lower fees charged as
trading volume increases. A "Flat-Rate" broker is one that
charges the same "per trade" fee regardless of the type of trade
or the volume of trades executed over a defined time period.
"Minimum Balance" and "Required Funding Amounts" are not a
cost to you, but they take money out of your pocket and are a
factor to be considered. One broker may require a minimum
balance be in your account in order to maintain it while another
may have no minimum balance. When you are setting up your
account, this could mean the difference between depositing $400
into your trading account because that is what you want to start
with, or having to deposit $2,500 in your account. A beginning
trader may not want to deposit that much into their account
initially, so that can be an important decision criteria when
selecting your trading broker. The broker comparison includes
these costs for you to compare brokers with complete
information.
Which Online Broker is the Best - Quality Factors
An online broker's service quality is also important when
you compare online brokers. There is a broad range of quality across these
brokers, but it is hard to determine these without direct
experience. This online broker review, therefore, relies on the
broker comparison ratings given by established and highly regarded financial
publications including SmartMoney - The Wall Street Journal
Magazine, Barron's, J.D. Power and Associates. These
publications conduct annual broker reviews rating the brokers
across a variety of service factors including the quality of
customer support.
Since these publications conduct these
trading broker reviews each year, there is a year-over-year
comparative capability. This means that you can not only use
their rating for the current year, but you can also see how that
rating has changed since previous years. This can give you a
good idea of how that broker is trending and areas where they
are improving their service.
Which Online Broker is the Best - Star Rating
This comparison and rating is primarily fact-based, reporting the brokers
pricing schedule and fees policies and ratings given by the
named publications. Based on the totality of the Cost Factors
and the Quality Factors, a star rating is given to summarize
that particular online broker's performance in that category
relative to its competitors. The overall star rating can be used
to directly compare brokers by combining
the Cost and Quality Factor ratings, using equal weighting (50%
given to each) to arrive at a summary rating that can be used to
choose a broker you want to open a trading account with.
Return to the home page to compare online
brokers.
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2011 BeginningOnlineTrader.com All rights reserved
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