Online Stock Broker
If you are looking for a good online stock broker, you probably won’t have to look very hard. In recent years the online trading world became incredibly competitive for online brokers and since they all offer pretty much the same service, the competition is fierce. The good news for you and me is that this drives prices down and today we have the benefit of instant trades at a fraction of the cost of what it used to be 10 years ago.
Traditional stock brokers performed exactly the same service that online brokers now perform. The main difference is just that the online process is fully automated and there are no “real person” who actually fulfills the buy and sell orders – it’s all done via computers that are directly linked up the trading houses and stock exchanges.
Back in the day with traditional stock brokers it was a very different story. If you wanted to buy a stock you would have to phone up your stock broker and tell what you want to buy or sell. He or she would then phone the trading house (on the floor) who would actually buy or sell the stocks. This process was not only slow but very expensive – hence trading was reserved to those who had the money to trade stocks.
As computers and the internet advanced, brokers started implementing trading platforms that allowed them to execute your trades instantaneously and as this became more sophisticated eventually public online brokers started springing up. Not only can you now trade without a physical broker, but you can do it at a fraction of the cost.
An online stock broker is nothing but a piece of computer software that buys and sells your stocks for you in exchange for a fee. The fees varies from broker to broker and is anything between $5 and $15 per trade.
Some of the big name online stock brokers are eTrade.com (the best in my opinion), Ameritrade and Scottrade. Each one has something unique to offer and you need to do a bit of research to see which one will suit you best. Generally speaking, those with bigger accou8nts get more privileges although even the most basic accounts still give you all the benefits to be a successful online trader.
Some things you need to look into a bit more before you make your decision are the following:
- The minimum amount you need to open your trading account and what do you need to maintain your account.
- Price. How much do they charge per trade and what account level do you need to qualify for that rate.
- Trading software. Do they offer you any trading software and if they do what account level do you need to maintain to get the software for free.
- Margin accounts. Do they offer margin and how much. Also check the fine print on the requirements and conditions of trading on margin.
- Options trading. Do they allow you to trade options and what are their requirements.
- Insurance and security. This is not really a big concern with large companies but smaller online brokers can fold and along with it your trading account will disappear.
- Speed of execution. How fast do they execute trades and what guarantees do they offer in terms of quoted prices.
- If you are in a foreign country, do they allow you to open an account and what exchanges will you have access to. Also, carefully check the required paperwork as this can be a cumbersome process.
