Choosing a Stock Broker – Guide to Stock Brokers

stock-broker

Picking a Stock Broker

Many new investors often wonder which stock brokers are the best? Or might be wondering How do I decide which type of broker is right for me?

Choosing a stock broker that is right for you is definitely one of the keys to be a successful trader & investor. With so many stock brokers out there-both online stock brokers and full service brokers, it can be difficult in choosing a stock broker.

When you open a brokerage account, it may be with a full-service firm, a discount firm, the online arm of one of those firms, or a firm that operates exclusively online.

The amount you pay for your transactions will vary, based on the type of firm you’re working with. Full-service brokerages are the most expensive. The level of individualized service varies too, particularly in the areas of investment advice. Full-service firms typically offer the most guidance.

So how can you tell which broker is right for you?

For many, one of the main factors when choosing a broker is the commission. Commission rates vary from broker to broker and each broker has a different pricing structure, such as some may have a flat-fee commission or some may charge per share.

Just because a broker has very cheap commission rates doesn’t necessarily make them the best of all stock brokers to choose. Some brokers may have very cheap rates, but have poor execution on trades, low quality tools or platform and horrible customer service.

The best brokers may not always have the cheapest commission rates of all the others, but has a competitive commission structure along with a good mix of great trade execution, high-quality tools & platform and great customer service, which ultimately gives customers the greatest value.

Before you open a brokerage account check out their commission rates. Also, note some online discount stock brokers might charge a small extra fee for buying stocks that trade Over-the-Counter (OTC) or penny stocks trading under $1, so look into that as well.

Recommended List of Online Discount Stock Brokers

online stock brokers

It can be very time consuming to find the right online broker that best fits your needs, so I have included some stock brokers I still use and I also looked around all the major discount stock brokers that offer the best value.

So, which stock brokers are the best? Below is my recommend list of stock brokers, all of which offer different features.

TradeKing

TradeKing has become one of the best online discount stock brokers. Just recently, TradeKing was given a 5 out of 5-star rating on its trading platform by Barron’s magazine. They offer a low commission of just $4.95 per trade.

One of the great features about TradeKing is they have a social networking community integrated into their site, where investors can discover new trading ideas, interact with others who are trading stocks and options, and see how they’re performing.

TradeKing – Standard Commissions

Stock Trades Options Per Contract Min. Account Deposit
$4.95 per trade $0.65 $0

Penny Stock fees:
TRADEKING adds $0.01 per share on the entire order for stocks priced less than $2.00. Maximum commission per order not to exceed 5% of the trade value, with minimum commission of $4.95. Minimum investment of $100 per order in OTCBB and Pink Sheet stocks. TRADEKING does not accept opening trades for stocks below $0.01 per share


ETRADE

Etrade is among the largest discount brokerages in the industry and one of the most popular. One of the best features I like about Etrade is that you can also setup a bank account and and IRA account and link them with your Etrade brokerage account for same day transfer of funds. Customers also get free debit card and check writing.

Their brokerage account offers great tools for both investors and traders. Currently their commission rate is $9.99 per trade and for more active traders the commission rate is $7.99 per trade.

As far as penny stocks, ETRADE allows customers to enter orders on NASDAQ and Listed stocks at prices under $1.00/share with up to 4 decimal places (“sub-pennies”). Orders for Pink Sheet and OTC Bulletin Board stocks at prices under $1.00/share with up to 4 decimal places are accepted as well.

They do have some Limitations on OTCBB and Pink Sheets orders:

  • No short selling allowed for OTCBB & Pink Sheet stocks
  • Generally, stop orders are not allowed for OTCBB/Pink Sheets trading.
  • Due to the potential volatility and differential in price, for protection, market orders are not accepted on any stocks trading under $1 per share. Only limit orders are accepted for stocks trading below $1.

ETRADE – Standard Commissions

Stock Trades Options Per Contract Min. Account Deposit
$9.99 per trade or $7.99 per trade for active traders $0.75 $500

Suretrader


https://suretrader.com

Suretrader is one of the newer brokers. They offer a really good value, offering a commission for only $4.95 per trade.

What I like about SureTrader is that you don’t need 25k to day trade, you just need 2k. Since they are based in the Bahamas you don’t have to worry about the Pattern day trader (PDT) rule.

For those not familiar with the PDT rule, it is a rule in the USA that if you buy and sell the same stock or option on the same trading day four or more times within a period of five trading days, you will be considered a pattern day trader.

Day traders are required to maintain $25,000 equity in their brokerage account at all times. If the account equity falls below $25,000, a day trading minimum equity call will be issued on the account requiring them to deposit additional funds or securities.

So, basically with SureTrader you can avoid the PDT rule and trade with just $2,000, instead of the normal 25k that is required to day trade in the USA. Besides that they offer great tools for traders and they also offer a free paper trading account, which is great for new traders that want to get some experience and education.

Another great thing about SureTrader is that they offer a great opportunity for trading and short selling penny stocks with lesser fees than brokers based in the United States. Visit the Suretrader website to learn more about them.

SureTrader – Standard Commissions

Stock Trades Options Per Contract Min. Account Deposit
$4.95 per trade $1 $500

TradeMonster


Free Option Education

TradeMONSTER offers excellent, browser-based trading tools, especially for options traders. They offer a virtual trading account (paper trading account), which is immediately funded with $100,000 of virtual money and customers can start practicing trading and playing with trading tools right away.

TradeMonster’s commission rate is a flat $7.50 per trade. For penny stock trades, TradeMonster adds $0.0005 per share on the entire order for any stocks priced less than $1.00. This is in addition to the standard commission of $7.50 per trade. For example, the commission rate of buying 1000 shares for a stock trading at $1 per share would be $8.00

TradeMonster – Standard Commissions

Stock Trades Options Per Contract Min. Account Deposit
$7.50 per trade $.50 $2000

Optionshouse


Trade Free for 60 Days at OptionsHouse

OptionsHouse is not just for options traders, they also provide good trading services for stocks. They offer loads of trading tools that has gotten high ratings.

Their flat-rate $3.95 per trade commission is among the lowest in the industy. For penny stocks, Optionshouse adds $0.0005 per share on the entire order for any stocks priced less than $2.00. This is in addition to the standard commission of $3.50 per trade.

TradeMonster – Standard Commissions

Stock Trades Options Per Contract Min. Account Deposit
$3.50 per trade $.15 $1000

Interactive Brokers

Interactive Brokers is geared more towards traders and they are considered to have one of the best professional trading platforms in the industry.

Their commission rate is pay-per-share, where customers pay $0.005 per share, with $1 minimum per order and no maximum.

Interactive Brokers has no surcharges on penny stock and they have good borrows for shorting penny stocks, even penny stocks that that trade OTCBB/Pink Sheets.

Interactive Brokers – Standard Commissions

Stock Trades Options Per Contract Min. Account Deposit
$0.005 per share $0.70 $10,000

TradeStation

TradeStation is a popular brokerage among traders. They offer a very good trading platform that ranks among the best in the industry each year.

You can choose between a per-share or flat-fee commission plans. There per-share commission rate is 1¢ per share up to 500 shares and then it is 0.6¢ per share thereafter. Or you can go with the flat-fee of $6.99 per trade.

Last I heard TradeStation doesn’t do OTCBBs or Pink Sheet stocks. But, can trade penny stocks trading on the NASDAQ and NYSE. They have easy to borrow shares for shorting stocks.

TradeStation – Standard Commissions

Stock Trades Options Per Contract Min. Account Deposit
$6.99/trade or 1¢ per share up to 500 shares and then it is 0.6¢ per share thereafter $1 $5000

LightSpeed

Lightspeed is one of my favorite online stock brokers. While, they might be geared more towards active traders, they do offer a web version platform that investors can use.

What I like about them is there clean and simple trading platform. Also, they offer great tools along with some of the lowest commissions in the industry.

There are two platforms available: Lightspeed Trader (min. $10K equity) and a Lightspeed Web version (min. $2K equity).

Lightspeed – Standard Commissions

Stock Trades Options Per Contract Min. Account Deposit
$4.50 per trade or $.0045 per share $0.60 $2000

As far as penny stocks, the standard commission rate applies to all penny stocks trading on the NASDAQ, NYSE, AMEX. Stocks trading on the OTCBB and Pink Sheets are $10.00 per trade.


TD Ameritrade

TD Ameritrade is one of the best-known and largest online discount stock brokers. They offer great trading tools for both traders and investors.

Their commission is a flat-fee of $9.99 per trade and unlike most other brokerage firms, TD Ameritrade does not have surcharges on penny stocks, large orders, and extended-hours trading.

TD Ameritrade – Standard Commissions

Stock Trades Options Per Contract Min. Account Deposit
$9.99 per trade $.75 $0

In Summary:

The stock broker you end up choosing is based on your personal preference. I can not recommend one broker over another. The stock broker that will fit your needs is based on whether you are a trader or investor, your financial situation, style of trade and your time frame.

Before you choose a stock broker, ask yourself these questions:

  • How much do I want to invest?
  • What investing strategy will I use?
  • What type of products will I invest in?
  • How much customer support will I need?

Once you have chosen one of the stock brokers and opened an account, knowing how to buy stocks is one thing but knowing the best stocks to buy and when to sell them is another. Remember, before you start investing and buying stocks, you must do research on the company before putting your money into their stock.

You can’t just go off and start buying random stocks and hoping they’ll go up in value. The point is, whenever investing in stocks, make sure you do research and understand what the company does, its financials and what you are getting into.