One of the most important steps to take before starting online trading is finding a good online stocks and options broker who provide you with the best trading features to help you accomplish your trading goals. There are a number of online brokers available and you need to do your research before you open your option trading account with them.
A good online stocks and options broker should offer you great trading tools to help you with trading, as well as offer you great technical and financial support. You need to choose a trading platform that is easy to use and, more importantly mobile-friendly. If you are seriously considering trading stocks and options, then read on to find out what features to look for before opening a trading account with online broker. At the end of this article we have listed some online brokers who are currently being rated highly in the trading community.
Commissions and Fees
When choosing your online broker, one of the first things to consider is the cost, that is, what the charges for the trading are. Some stock brokers require a commission for every trade, which costs approximately 1% or 2% per every transaction. These are called full service brokers. However, there are other stocks and options brokers who ae called discount stock brokers, and have flat fee. Opening a trading account with them is not a bad idea at all since having to pay higher commissions with full service brokers will reduce your profit significantly.
If you are opening a margin trading account then you should also pay attention to the margin interest rates that online brokers charge, as well as the minimum deposit they require to open a trading account. Every additional fee matters, since more costs mean less profit for you, so you need to carefully think all the options through before you make your final decision of choosing an online broker for your needs.
However, while commissions and fees do matter, they shouldn’t be the key factor when choosing your broker, since it is a fact that you get what you paid for. So, sometimes it is worth paying a little more if that will get you the best service for your needs – the cheapest is not always the best bet. There are other factors to consider in choosing stocks and options broker
Dilemma of New Traders.
Two kinds of traders should pay special attention to their choice of broker before opening their trading account.
These traders are either new traders or traders with less financial resources or new traders with less financial resources.
These two types of traders should start out slow and with very little amount exposed to each trade as trading is full of surprises and blunders. Brokers who let you open the account with little upfront money charge higher in commission fees and usually on per trade basis such as $14.95. Think of them as shark. It does not matter if trader buys one option contract or ten contracts or 50 shares of 500 shares, the fee is the same.
Since new trader or traders with less financial resources should only be putting little amount per trade, therefore, they should be paying the commission on per contract or per share basis.
However, these two types of traders do exactly the opposite. In order to reduce the commission fee on per share or contract basis they buy large number of shares or options contract. When trade goes against them they lose bigger chunk of their trading capital on that single trade. In order to recover the loss these traders put in bigger amount in the next trade. And it is quite possible that in five consecutive losing trades these traders can wipe out their account. However, their brokers are the one who made bunch of money through their exorbitant fees.
Most of the brokers these days who charge reasonable commission fee require minimum of $10,000 to open trading account. Therefore, new traders should not think of trading if they do not have $10,000 to devote to trading. Once they start trading then they should think as if they only have $4000 or $5000 in their trading account.
Software or Web-based Trading Platform
There are two types of trading software. Software-based and web-based. Some brokers only have software-based trading platform. This means you have to download the software on your computer. If you have more than one computers than you have to download and install the software in each computer along with all your charts, workspaces, indicators, studies and preferences.
The web-based trading platform runs on the web and it does not require you to download the software on your trading machine. A web-based trading platform usually runs on some programming language, such as Java. A web-based trading platform removes the hassle of downloading the trading software on each trading computer (desktop, laptop etc.) This means you can trade using either a computer and or your mobile device as long as you have internet connection. Web-based trading platform is perfect for those traders who are on the move and not in front of their computers all the time.
However, web-based trading platform has drawbacks too. These tend to have less features such as charts and trading signals. The web-based trading platform may also lack advanced trade analysis. The browser itself may not function properly despite having fast internet speed and you may encounter occasional disconnection from your trading platform.
In nutshell a broker should have user-friendly web-based trading platform where execution of various kinds of orders are simple. Your broker should have excellent support system. In case you are not able to access your trading platform on the web then you should be able to contact them via. Phone right away. The broker should be willing to execute your orders on your behalf, without charging you extra fee for doing it. Ideally, your broker should have both types of trading platform i.e. software-based and web-based.
Execution of Order
Another extremely important factor when it comes to choosing the right online broker is the execution speed of the orders. By law, brokers are obligated to give each of their clients the best possible order execution. A broker executes your order in a number of ways. Therefore, execution of order not only at lightning speed is very important but the execution of order has to be impartial and at the lowest price possible. Brokers have different motives for directing your orders to specific places. Therefore, the choice of broker can affect your trading bottom line. So it is prudent to know how brokers execute and route your orders.
The Best Online Brokers in USA
Following are the online brokers in USA who we think provide excellent features in trading such as ultra-low fees or excellent trading technology and tools or both software-based and web-based trading platform or best support system. Before you open your trading account, it is advised that you visit each of these broker websites and do your homework.
TradeStation
– http://www.tradestation.com/
Award Winning Trading Software, Execution Technology, Rich Online Education, Low fees
InteractiveBrokers
– https://www.interactivebrokers.com
Low cost, best execution and innovative technology
OptionsHouse
– https://www.optionshouse.com/
Advanced Trading Tools, Preferred for Options Trading
LightSpeed Trading
Plain-Vanilla Broker, Ultra-Low Trading Fee
ThinkorSwim
Innovative Trading Platform, Reasonable Fee
OptionsXpress
Web-based Trading Platform, Higher Fees
TradeKing
– https://www.tradeking.com/pro.php
Fixed Plus per contract Fee
ETrade
– https://us.etrade.com/home/v3
Interactive tools for new and experienced options investors
We hope we have helped you make your decision about finding an online broker that will be the right fit for your needs. We wish you good luck and all the best!