Internet Stock Brokers
Choosing from the large number of internet stock brokers can be a daunting task. There are so many factors to consider and so much riding on the decision.
There is absolutely no doubt that the broker you choose can have a massive effect on your trading results, so it is imperative that you choose wisely.
There are many factors to consider when selecting an internet stock broker including:
Cost per trade
This is perhaps the most important consideration. Stock brokers such as OptionsXpress and Tradeking let you trade for less than $5 a trade.
Also if you plan on making trades over the phone, be sure to check if your broker charges extra for this. Brokers tend to call this "Broker-assisted trading". Optionshouse and Tradeking are two brokers that do not charge extra for broker assisted trades.
Some brokers charge extra for trading penny stocks. In my view the best internet brokers for trading these kind of stocks are OptionsXpress and TDAmeritrade. These two internet stock brokerages do not charge any extra for trading penny stocks.
If you plan to trade stocks on margin, these rates can be very important. Margin rates can vary hugely between brokers, so it's important to shop around to get a good deal.
Minimum Account Size
Some brokers do not really want the custom of very small traders, so they impose a minimum account size. If you have a medium or large sized trading account, this is highly unlikely to ever be an issue.
However if you are a smaller trader with an account size of less than $2,000 USD, you may not be able to get an account with some internet brokers.
OptionsXpress a broker with no minimum account size. You can even open an account with just $1 if you wanted to.
These fees tend to really annoy me, as I once got charged these fees without being aware of them. Admittedly it was partly my own fault for not seeing the small print, but I thought it was a very sneaky and dirty business practice.
They are charged if you have a trading account with a broker and do not use it for a period of time, commonly six months.
All the brokers I have talked about in this article so far do not contain such fees. They annoy me so much I don't even talk about them!
The best internet stock broker for you is going to depend on your style of trading. If you are a long term buy and hold investor, the cost per trade isn't going to be a big a concern as if you are a day trader as you probably aren't going to make anywhere near as many internet stock trades.
If you are a penny stock trader, you need to be extra sure that your broker isn't going to charge you extra for trading these kind of stocks.
There is so much out there nowadays, you can really afford to be picky. Being a stock broker can be a highly lucrative business, so they will all eagerly accept your business.