Ed Carlson
Editor, Online Stock Trading
Ed Carlson is an independent trader, Chartered Market Technician, and the author of two popular books. He has over 20 years experience in the financial industry.
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Online Stock Trading
Choosing the best online broker can be a daunting task because there are a number of major stock brokers that seem very similar. The features that an investor or trader values will vary greatly from person to person. In addition, any investor must take into account all of the costs and fees associated with an online trading account to make a solid decision. Knowing all of this information up front will be a great benefit for anyone who is interested in online stock trading.
Buying Guide
1. Reviews
2. Features
3. Consumer
Profiles
Profiles
4. Types
Chapter 2: Features
What Online Stock Trading Features Matter and Why?
Tools and Technology
Tools and Technology encompasses everything that has to do with being able to make a trade as well as a number of tools to simplify trading or execute advanced trades. The Tools and Technology category includes a variety of features from the most basic, like alerts and watch lists, to the more advanced features, such as automated trading, spread builders, and options tools. Tools and Technology is the most important category when looking at an online stock broker because no trader wants to be limited and getting the best price on each trade is very important.
Alerts
You can set up personalized alerts for your portfolio or other investment products.
Automated Trading
The broker allows you to place trades by setting automated triggers to execute a trade.
Conditional Orders
You can place orders that, when executed, immediately triggers or cancels another trade.
Customizable Interface
You can customize the layout and look of a trading platform.
Level II Quotes
The broker gives you access to the book order of individual stocks so you can see live buyers and sellers of that stock.
Option Chains
You can simply find an options premium by following the corresponding maturity dates and strike prices.
Options Exposure
You can view a detailed display of your options positions' possible sensitivity to key risks using industry standard greek calculations.
Options Tools
The broker offers a variety of options trading tools.
Platform - Advanced
The broker offers an advanced trading platform.
Platform - One-size-fits-all
The broker offers a platform that is fitting for traders of all levels.
Quick Order Entry
You have the option to quickly enter or cancel orders faster than normal.
Real-Time Charts
The broker offers access to charting tools that update in real-time.
Smart-Order Routing Technology
The broker sends orders to different market centers that seek to fill your order quickly and at the best available price.
Spread Builder
The broker offers a tool to build your own spreads between multiple investment products.
Streaming Real-Time Quotes
The broker provides streaming real-time quotes so you can see up-to-date prices of investment products.
Trailing Stops
You can set a stop-loss as a percentage below the market price that adjusts as the price fluctuates to help you secure profits and cut losses.
Watch List
You can create watch lists to keep an eye on investment products that interest you.
Investment Products
Investment Products is a category made up of the markets that an online stock broker makes available for someone to trade. Investment Products is made up of simple choices, like stocks and mutual funds and more advanced choices, like access to futures, forex, and international markets. Investment Products is an important category, especially for those who are selecting a broker based on a desire to trade a specific investment product.
Bonds
You can trade bonds.
Commission-Free ETFs
You can trade commission-free exchange-traded funds.
Easy to Borrow Stocks
You have access to easy-to-borrow stocks that you can sell short.
ETFs
You can trade exchange-traded funds (ETFs).
Forex
You can trade forex or foreign exchange markets.
Futures Markets
You can trade futures markets.
International Markets
You can trade markets outside of the U.S.
Mutual Funds
You can trade mutual funds.
Options
You can trade options.
Pink Sheet and OTCBB Securities Market Access
You can trade pink sheet stocks and over-the-counter (OTC) securities.
Stocks
You can trade stocks.
Mobile Trading
Mobile Trading is the ability to access a trading account using a mobile device. Mobile Trading takes into account the availability of the app for a variety of devices, the functionality of the features within the mobile app, and how users have rated the application. Mobile trading continues to grow in importance as the quality of applications improve and more traders look for account access on the go.
Android
The broker offers an app for Android devices.
BlackBerry
The broker offers an app for BlackBerry devices.
Create Alerts
You can create alerts with one or more of the mobile trading applications.
Cross-Platform Integration
The mobile trading application integrates with your trading account in real-time, including watch lists, alerts, and other account information.
iPad
The broker offers a dedicated app for the iPad.
iPhone
The broker offers an app for the iPhone.
Mobile Deposits
You can deposit checks or electronic funds into your account with a mobile application.
Mobile Research
You can conduct research using one of the mobile applications.
Mobile Website
The broker offers a separate mobile website for accessing your account on the go.
Other Tablet
The broker offers an app for another tablet device besides the iPad.
Place Trades
You can place trades using your mobile device.
Portfolio Tracking
You can track your portfolio using a mobile device.
Streaming Quotes
The broker offers streaming quotes on mobile devices.
Virtual Demo
You can demo the mobile trading platform by using a virtual trading account.
Watch List
You can create watch lists using a mobile app or device.
Windows Mobile
The broker offers trading on Windows Mobile devices.
Favorable App Store Reviews
The broker's iPhone application has received three stars or greater from users in the Apple App Store.
Research
Research is the additional amenities that an online stock broker provides to their clients to help them make calculated decisions and understand market activity. The best online stock brokers in terms of research will offer advanced charting capabilities, third-party research, research reports, and market commentary. Research is an important category for investors who are looking for assistance in making decisions as well as independent traders who are seeking confirmation on a trade or a second opinion. Some of the more self-directed brokers offer less research amenities because they cater to more advanced traders who conduct independent research.
Blog
The broker keeps an updated blog that includes company and investment information.
Charts
The broker offers access to charts so you can conduct research on investment products.
Company Publication
The broker produces and distributes a company publication to account holders.
Market Commentary
The broker offers market commentary from outside experts.
News
The broker provides daily market news and updates.
Research Reports
The broker offers a selection of research reports.
Screens
You can screen investment products to narrow down the type of investment you are looking for.
Tailored Research
The broker provides you with research tailored to your current portfolio, watch lists, or interests.
Third-Party research
The broker offers independent investment research from outside parties for free.
Upgraded Research
The broker offers upgraded research at an additional cost.
Support
Support is how well an online stock broker interacts with their clients to provide assistance and the availability of the company's support channels. The best online stock trading software in terms of support will always have basic features, like live chat, social media, email, and phone support. Some of the top online stock brokers also have retail locations where you can speak to someone in-person. Support especially matters for online stock trading because money is involved and often times a quick response is needed.
24-Hour Support
The broker offers some form of 24-hour support, which is usually phone support.
Additional Languages
The broker offers additional languages besides English for some aspect of its business.
Dedicated Tech Support
The broker offers dedicated support strictly for technical issues.
The broker offers email support to customers.
The broker has an active Facebook page where you may be able to post questions and get a response.
Fax
The broker has a fax number displayed on their website.
Live Chat
The broker offers live chat on their website.
Phone
The broker offers phone support to customers.
Retail Location
The broker has a retail location where you can talk to a representative live in person.
The broker has an active Twitter page where you may be able to post questions and get a response.
Education
Education is all of the resources that an online stock broker provides to help their clients learn about investing as well as executing trades with the software. The online stock trading software that excels in the Education category will regularly offer multiple education levels so that novice investors can advance and seasoned investors can continue to learn. Education is less important to an advanced investor, but a beginner will benefit greatly from the courses and webinars offered by most online stock brokers.
Courses
The broker offers educational trading or investment courses.
Education Levels
The broker offers a variety of education based on experience levels.
Glossary
The broker has a glossary that defines important investment terms.
Live Seminars
The broker offers live in-person seminars around the country that you can attend.
Online Community
The broker has an online community to have discussions and share advice with other traders.
Webinars
The broker offers webinars to help you learn about investment products.
Account and Portfolio Information
Account and Portfolio Information refers to the data and display options associated with the financial information of an online stock trading account. All of the best online stock brokers will update account information in real time, display account balances, and provide history reports and statements. While Account and Portfolio Information is relatively important, it's safe to assume that most of the best online stock trading software will have the most important features. An investor who requires specific portfolio reporting features may want to take a harder look at the features in this category.
Account Balances Displayed
Your account balances are displayed on the page where you access detailed portfolio information or account reports.
Account History Reports
You can create reports or view statements of your portfolio or account information.
Download Statements
You can download your account statements to your computer.
Export Data
You can export your portfolio or account statements.
Gain/Loss
You can run reports to view your gains and losses to determine the impact on your taxable income.
Order Status
You can quickly view your current trading positions and open orders.
Portfolio Planner
You can view your current portfolio allocation and create a plan to measure against it.
Real-Time Updates
Your account balances update in real-time, adjusting for any open postions.
Financial Resources
Financial Resources are additional amenities provided by online stock brokers that don't have anything to do with executing a trade or learning about the markets. Many of the major brokers provide financial resources to their clients to capture more than just their trading business. Some of these resources include banking services, retirement planning, savings plans, and credit or debit cards. Financial Resources isn't an overly important category to the masses because only certain types of brokers provide these resources for people who want everything in one place. For those who simply want access to trading, financial resources should mean very little.
Banking Services
In addition to trading services, the broker offers online banking services.
College Saving Plan
The broker offers a college savings account.
Credit Card
The broker offers access to a credit card through its banking services.
Debit Card
The broker offers access to a debit card through its banking services.
IRA
The broker offers access to an Individual Retirement Account (IRA) that provides tax advantages for retirement.
Retirement Planning
The broker offers a retirement strategies and advice.
Small Business Tools
The broker offers specific services or plans for small businesses.
Tax Tools
The broker offers tax planning tools to provide tips and help with your investment strategy.
Wealth Assessment Tool
The broker offers an interactive program that calculates your wealth so you can see how these factors will affect your retirement.
Account Security
Account Security is how safe an online stock trading account is based on regulatory membership as well as additional security measures offered by the online stock broker. Some online brokers take the additional step to offer an asset protection guarantee for any losses due to unauthorized account access, while others provide special security measures while logging into an account. Account Security isn't as important simply because every online stock trading software has measures in place to protect a client's account. However, where some of the best online stock brokers stand out is by going above and beyond in terms of security and protection.
Asset Protection Guarantee
The assets in your account are protected from any unauthorized activity.
FINRA Listed
The broker is regulated by the Financial Industry Regulatory Authority.
SIPC Member
The broker belongs to the Securities Investor Protection Corporation, which acts as trustee or works with an independent court-appointed trustee to recover any missing funds.
Special Security Measures
The broker offers additional security measures to protect your account.
Learning Materials
Learning Materials is the measure of how an online stock brokers assists a new person in using their stock trading software. It's not to be confused with how easy the software is to use. One of the unique features that helps with the learning curve is virtual trading, which actually lets someone use the product with fake money to avoid potential errors with real money. Learning Materials has a lower importance rating because some initial time investment is expected with any new product. Keep in mind that an online stock broker may offer a large amount of detailed material to help learn the software, but that doesn't necessarily mean it's simpler to use, though it is a nice additional feature.
FAQ Page
The broker has an FAQ page or pages to answer common questions.
User Guides
The broker offers some sort of user guide to help understand the product.
Virtual Trading
You can make trade with a virtual account to test your strategies.
Incentives
Incentives are the rewards or offers that someone would receive from an online stock broker. Some of the incentives for using different online stock trading software are introductory offers and a customer rewards programs. Others offer free trading demos so that traders can test out the software before committing to the broker. Incentives aren't considered very important because they're generally not related to using the services of the broker, but for some, it will be nice to be aware of the potential bonuses that could sway a decision between two online stock brokers.
Customer Rewards Program
The broker offers a referall program or customer rewards program.
Free Trading Demo
The broker offers a free trading demo so you can try one of the trading platforms.
Introductory Offer
The broker has a special offer for new traders who open an account.
Chapter 3: Consumer Profiles
Who Uses Online Stock Brokers?
Research-Based Trader
A research-based trader is someone who heavily uses research and charting tools to plot an investment strategy. Research-based traders are often more on the independent side, but value the ability to dig deep and use a broker's resources to solicit opinions and additional information.
Retirement Planner
A retirement planner is an investor who is less focused on actual trading and more focused on savings plans, IRAs, 401(k), and retirement planning tools. A retirement planner may not be interested in making any trades at all. However, if any trades are executed by a retirement planner, they will be low-risk and for the long-term.
Recommended Products:
Professional
A professional trader is anyone who primarily makes a living by trading the financial markets. Professional traders must have a combination of low trading costs and fees, access to all financial markets, and the best trading tools and technology. Most online stock brokers are not suited for professional traders.
Options Executioner
An options executioner is someone who primarily makes options trades. This type of trader is looking for the lowest options contract prices and flat fees as well as the best options tools and technology in the industry.
Deal Seeker
Any trader or investor who is seeking rock bottom prices when it comes to executing a stock or options trade, regardless of any minimum account deposit. A deal seeker will also appreciate any incentives offered by a broker when signing up for an account. Deal seekers won't be concerned if a broker doesn't offer additional resources, like education and financial services.
Self-Director
A self-director is an experienced investor who doesn't need additional research or extra amenities to make trading decisions. Self-directors will gravitate towards trading platforms that are simple to use and offer extensive trading tools and technology. A self-director isn't necessarily an overly active trader, but this person is comfortable executing trades and has a trading plan in place.
Active Trader
An active or high volume trader is someone who plans on placing more than 20-30 trades per month. This type of trader is more apt to trade with a broker that offers lower trading costs and fees and an advanced trading platform.
Cost Cutter
A cost cutter wants to keep all fees and additional costs to a minimum. Investors looking to cut costs will often gravitate towards the brokers that offer lower trading fees, no initial deposit to open an account, and those that will not charge any maintenance fees.
Long-Term Investor
A long-term investor prioritizes portfolio planning and allocation, while focused on more of a buy-and-hold strategy. Long-term investors make very few trades per month and are focused on a low-risk strategy. Some additional elements that long-term investors find accommodating are top-notch customer support and other financial resources, like IRAs, college savings plans, or small business tools.
Mobile Trader
A mobile trader actively uses mobile trading applications to access account information, conduct research, and most importantly, execute trades. This is someone who is often away from his or her desk and will be looking for the most advanced mobile trading apps to trade on the go.
Developing Trader
A developing trader is constantly looking for ways to improve and expand his or her trading abilities, regardless of experience level. These traders will generally place a high value on educational and research resources. Developing traders are ideally looking for a broker that will support growth and offer more than just the basics when it comes to trading tools and technology.
Tech-Savvy Trader
A tech-savvy trader only wants to use the best trading tools and technology offered in the industry. This person doesn't care too much about trading costs or the other account resources that are available. A tech-savvy trader is willing to try new tools to execute trades and is not afraid to use propriety advancements offered by brokers as well as mobile trading applications.
Novice
A novice is looking to enter into the world of trading and investing, but doesn't bring much experience or prior knowledge to the table. The brokers that are best-suited for a novice will offer extensive educational resources, plenty of quality customer support, and simplified trading tools.
Chapter 4: Product Types
What are the Different Types of Online Trading?
Online Brokers
The most popular type of online trading takes place through the online stock brokers reviewed on this page. Each of these online stock brokers excels in different areas and targets various types of traders or investors. Many of the major brokers are publicly traded companies that offer a wide variety of investment products and resources for all types of individuals. Some of the other online stock brokers cater to specific people, like options traders, and a few target professional or active traders with low costs or fees. An online stock broker offers a trading platform, charting tools, and everything necessary to trade all in one place.
Day Trading Software
Day trading software is another way people can engage in online stock trading. The important distinction to note is that day trading software is geared towards professional traders, while online stock trading software is geared to the masses. Most traders who use a day trading software are indeed trading as their primary source of income. This fact alone makes the functionality and connectivity of the software very important. Most day trading software products offer charting capabilities and some offer advanced analysis tools. Some day trading software products also integrate with the online stock brokers to make it easy for a trader to use a broker’s financial resources along with a professional day trading software.
Forex Brokers
Online forex brokers specialize in offering forex trading services, but some also offer additional products, like futures trading. Forex (foreign exchange) is a market where one nation’s currency is exchanged for another at a mutually agreed rate. Several of the online stock brokers also offer access to forex markets, so traders don’t necessarily have to choose a forex broker if they wish to trade forex markets. However, there may be some advantages to selecting a forex broker if forex trading is a priority, like access to additional forex markets as well as specialized trading and analysis tools.
About the Editor
Ed Carlson
Online Stock Trading Editor
In the past few years, Carlson has written the books, An Aid to Timing and George Lindsay and the Art of Technical Analysis. He also manages manages the website, Seattle Technical Advisors, where he publishes daily and weekly commentary. Carlson was born in Wichita, KS and earned a Bachelors degree in Guitar Performance while studying under the jazz guitar legend Jerry Hahn at Wichita State University.
