Finding a good online broker you can trust - where you get good service at a reasonable price - that is the first objective you should have when you decide to get involved in online trading.
This is one of your most important decisions and it can make the difference between a rewarding investing experience and a frustrating one.
You will probably narrow your search down to three or four possible online trading websites. Your initial choices will probably be based on recommendations from friends, internet searches, advice from people you trust or articles you’ve read. But once you have that short list, here are some things you should compare.
First, look for a fair and simple pricing structure. “Simple” is important because many online trading sites - like those notorious cell phone companies, credit card companies and banks - will add on unexpected fees when you are least expecting them.
As with most products, the lowest price is not necessarily the best choice, because a low price will sometimes come with missing options and downgraded service.
But in online trading that is not necessarily the case. And, in fact, if you look carefully you will find that some of the best online trading sites for buying stock and selling stock are also the lowest priced.
That’s why a simple and transparent pricing structure is important. Make sure the price per trade is clearly displayed, and read the fine print before signing on the dotted line.
Some online trading websites that do online options trading will charge extra for each options contract. Be sure you understand that additional charge. These prices can vary dramatically and will make a big difference to your bottom line, so study the numbers carefully.
A quick comparison of a few published rates illustrates the importance of looking carefully. For example, TDAmeritrade currently charges $9.99 per trade, E*Trade charges $12.99, Scottrade $7.00 and TradeKing just $4.95 per trade. The difference for “broker assisted” trades is even greater. TDAmeritrade is $44.99, E*Trade is $57.99, Scottrade $27.00 and TradeKing again only $4.95.
Even in the short term that can make a substantial difference to your investing success, and you can imagine how much you might save over the long haul if you become an active trader. It definitely pays to compare online trading prices.
Of course once you have reviewed the prices of different sites you should move on to a comparison of their investing and trading services.
Look for things like availability of customer service channels such as instant chat, direct lines to actual brokers, online tools, and access to forums where other member traders can offer free (and often very helpful) investing and options trading advice.
You may be surprised that the level of service offered by different online stock trading sites is not at all related to their pricing. In some cases, the best service is actually available from the lowest cost online trading sites.
Join more than 130,000 other satisfied traders by opening an account with TradeKing.com, where options trading online is our specialty.
