Online Discount Brokers – A Comparison

So you fancy yourself a day trader, do ya? Well, beyond the basic equipment requirements of a computer and a fast internet connection, you are going to need a broker to execute your orders. See, you cannot just call up the NYSE or the NASDAQ market yourself and ask Chuck or Larry on the floor to make a trade on your behalf. No, in order to place a buy or sell order on your favorite stocks or futures, you will need an account with an authorized broker/dealer firm that occupies a seat on the exchange.

Fortunately for you, there are myriad discount brokerages online that would be happy to have you as a client. Your job as a wannabe trader is to find out which Pepperstone Review online stock broker best suits your investment philosophy, trading style, and research needs. Choosing an online discount broker is a big decision, and we want you to make an informed decision. So enjoy this brief online broker comparison, and if you have something to contribute to the discussion, please join us at the free Q&A forum mentioned below.

What Will You Be Trading?

Firstly, you need to ask yourself which types of investment products you plan on trading. There are stocks, of course, but many day traders also like to trade options, futures, forex currencies, and commodities as well. If you think that you might want to try trading some or all of these more sophisticated products, then it is in your best interest to choose a broker with trading privileges in all of these markets.

A Word On Commissions

Fees and expenses are another important consideration when picking an online broker. Even though some firms claim to be discount brokers, the commissions charged by these financial institutions tend to run the gamut. So, read the fine print of any brokerage’s commission schedule to see if their discounts only apply once you’ve met a monthly quota of trades or if there is always just one flat fee.

You Get What You Pay For

Now, on to the brokers themselves. Everyone wants cheap online stock trading, right? But with many of these discount internet stockbrokers, sometimes you get exactly what you pay for. Thus, try not to get too caught up in the actual cost of each roundtrip trade. Sometimes it is worth paying a few cents or dollars more per trade if you are getting access to better charts, have a robust data feed, and a wealth of filtering and research tools at your disposal.


Interactive Brokers

POSITIVES: If you want access to global markets, plan on being a highly leveraged trader using margin loans, and you like ultra-low-cost commissions, then Interactive Brokers is just for you. Rated as one of the top discount brokers for international trading because they give you access to over 80 markets centers in 19 countries, Interactive Brokers is a gem for active traders who demand fast execution and who trade big lots on margin. With their Smart Routing technology that routes your order to fill at the best available price and their extremely low margin loan rates which let individuals borrow as low as 0.50% below Schwab and Fidelity, they are one of the cheapest online brokers. Recently IB reduced their futures commission to just 85 cents (flat) per contract or as low as 25 cents if you reach certain volume tiers. And their stock and ETF commissions at just $0.005 per US share all-in are easily the lowest in the industry. Finally, IB’s market data feeds are waived if you spend over $30 per month in commission.

NEGATIVES: It’s not all sunshine and lollipops, however. Interactive Brokers lags other online brokers in a number of ways. For one, their high initial deposit of $10,000 precludes a number of beginning investors from opening up an account. Secondly, their customer service is less than stellar. And if you need to make a broker-assisted trade because your computer died, good luck. What’s more, their software is very buggy, their charting and screening tools are rudimentary, and their data feed filters tick data, so traders who want to create charts based on TICK frequency don’t get an accurate picture.