Online Brokers Comparison
6/3/2014 Update: I currently use ThinkOrSwim(now part of TD Ameritrade) for most accounts(I tried various brokers for options and ThinkOrSwim is my favorite platform and easy to look at Options/stock/futures all together) and I use TradeKing for a retirement account. For best broker ratings/overview just reference Barrons Magazine annual broker review, Here is the link to the 2014 review
Just some quick thoughts about online brokers. Overall, picking an online broker depends on what your goals are when using the broker. Here are some things to think about before choosing:
- Are you going to be trading a lot?
- Will you be trading in small or large amounts each trade ?
- Will you be using margin ? (compare margin rates)
- Will you be really active or just occassional trader ?
- Do you need a lot of help or tutorials or support ?
- Do you need to move money in/out frequently or check writing features?
- Will you be shorting ?(some brokerages aren’t good for shorting because they dont have the shares to lend………Interactive Brokers is good for shorting)
Overall the questions can keep growing but generally for trading your important concerns are cost per trade, execution, ability to use margin/shorting, realiability, and customer support.
Understand that brokers make money from account fees, trading commissions, margin interest and using your cash for lending. I hate fees so I avoid the bigger online brokers that tout offering lots of services like “free” wallstreet reseach(which if you have invested for while, you know wallstreet/sellside research is pretty worthless), or lots of fancy account tracking stuff,etc………..Honestly I just care about trading costs, good execution, and reliability with little to no account fees.
I personally have used quite a few brokers but here are a few that are good/reliable (Realize this is my experience, so I cant speak for others):
- ThinkOrSwim – Hands down my favorite broker now, especially for options. Their platform is very good(you can try it for free with their “PaperMoney” account.). Their execution and charting is the best and when I became more active with options strategies I tested 3 other options brokers platforms as well as having used all the ones below and I found ThinkOrSwim to be the best. (Tip- you can ask for lower commissions if you are more active than what they have advertised and they will even match a lower commissions advertised at many other brokers especially if you are transferring in an account).
- Interactive Brokers – For active traders(even if you trade small size) Interactive Brokers is the best as their commissions are per share basis(CHEAP) and the money you save for active trading is worth it. If you are a brand new trader you might find them not as user friendly as some of the more mainstream brokers because they cater towards more experienced investors. The are a huge broker for amount of executions/volume and the executions are excellent. I honestly haven’t taken the time to figure out all the trading platform features so I simply use them for order entry and account tracking. They have good online service.
- Tradeking – Is pretty good and I have an IRA there. Their have little fees and everything works well. They offer lots of seminars online and trading education for those that use it. I have never used any of it but they reinvest dividends automatically for my ETF’s and they seem pretty good. They have a very active user forums too. The only drawback is that it’s an online order platform vs. a desktop platform.
- Scottrade – I signed up with then many years ago when $7 a trade was cheap but for a brokerage where people want more services like check writing and regional customer service(they have local office in bigger areas) it works good for people who want more service but for a trader it can get expensive using them. I moved one of my IRA to Tradeking because Scottrade wouldn’t automatically reinvest dividends(Maybe they do now ?). Overall though Scottrade has excellent service, a good trading platform, very reliable, but I would probably use some cheaper for trading.
I have also heard good things from other traders about(I HAVENT USED THESE):
- MBTrading.com(cheap) – I tested their platform and they have lots of choices.
- Sogotrade.com (cheap but not sure about their quality of trade execution)
- TradeMonster.com – Consistently rated highly in Barron’s annual broker review. Has lots of features and competitively priced.
My only really bad experience has been with Schwab.com.
Overall, think about what you will be doing with the account. If you are small and trade small # of shares then a per share cost broker(Interactive Brokers) or low cost(Zecco, Tradeking,etc…) will be important. If you need margin then definitely pay attention to the margin rates. I don’t care as much in my trading about interest paid to me on my cash but if you are carrying large cash/money market balances then pay attention to that………
You get the picture. Find what works for you but don’t put your trading account with a full service(aka EXPENSIVE) broker.