One thing you need to know if you plan on getting into trading stocks is an online broker. An online broker will allow you to trade stocks from home in real time and for very little, if any, commission.
Your broker needs to be someone that has a reasonable minimum, quality trading tools, great customer service, and you will probably want them to not have any hidden fees in their contracts. The problem now is finding an online broker that comes with these qualities and works great for you.
Finding a good online broker can seem like a daunting task, especially with technology making it so much easier to find brokers of any kind.
Unless you are an expert in terminology and know exactly what you are looking for, you may find yourself drowning in options.
Never fear, we are here to help you narrow down your choices. We have created this list of the best online brokers for stock trading.
Top Online Brokers for Stock Trading:
- Fidelity Investments – Best For Experienced Investors
- Vanguard – Best For Passive Investors With Significant Deposit
- SoFi Automated Investing – Best For Customer Service
- JP Morgan Self-Directed Investing – Best For Welcome Bonus
- Charles Schwab – Best For Analysis and Research
- Interactive Brokers – Best Package For Starters
- Robinhood – Best For Amateur Traders
- E-Trade – Best Education Source For Beginners
Fidelity Investments - Best For Experienced Investors
Fidelity Investments has millions of customers across the USA and overseas. The company has been around for fifty years and is considered one of the largest brokerage houses in the world. The majority of Fidelity operations are in the USA, and it operates various investor centers and regional offices across the country.
Fidelity investment products range from annuities, mutual funds, and options through to sector investing and managed accounts, catering to advisors, institutions, employers, and individual investors. However, Fidelity also offers its investment services to international clients, but this is only in a limited number of countries, and it is via a separate, dedicated site.
Although it is not the cheapest brokerage house, Fidelity does excel in many areas where other companies lack. So, if you are prepared to pay a premium for outstanding trading education and excellent customer service, Fidelity could be the broker for you.
Vanguard - Best For Passive Investors With Significant Deposit
Determined to change the way the world invests, Vanguard offers a different perspective to asset management. For sure, Vanguard is different than any other brokerage house in the United States, for the simple reason that it focuses more on investment management rather than on brokerage.
Vanguard runs a hybrid business – a combination of traditional brokerage (for stocks, ETFs) and investment management. Vanguard has over 30 million investors and focuses on funds management. Addressing both individual investors and financial professionals, Vanguard manages over 190 funds in the United States and more than 230 outside the country. It also operates Vanguard Brokerage, allowing individual investors to trade stocks and ETFs via a traditional brokerage account.
JP Morgan Self-Directed Investing - Best For Welcome Bonus
The J.P. Morgan Self-Directed Investing (hosted via the Chase Mobile App) offers a variety of options for investors as well as generous sign up bonus.
New customers are eligible for up to $625 when you open and fund a J.P. Morgan Self-Directed Investing account with qualifying new money, this is one of the highest welcome bonus available for self directed account out there.
Investors can use the Self-Directed Investing app to buy and sell stocks, ETFs, mutual funds, and bonds with no commissions. It also allows investors to buy and sell extremely low-cost options. Users can use the app to create watchlists and research individual investments. However, the default views are based on portfolio totals. This keeps investors from “mistaking the forest for the trees.”
INVESTMENT AND INSURANCE PRODUCTS ARE: NOT A DEPOSIT • NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE
SoFi Invest - Best For Customer Service
SoFi is a great choice for those that do not afford trading with a regular, traditional investing house. High transaction costs and other barriers to entry (e.g., high minimum initial deposit) keep many wannabe investors aside – investors that just cannot afford the services but are willing to take a chance.
For such investors, SoFi is the ideal choice. No commissions or fees for transactions, easy-to-understand products (crypto, stocks, ETFs), one account to trade them all from, a friendly app, and the ability to start investing with as little as $1.
Charles Schwab - Best For Analysis and Research
With a strong physical presence in the United States and 24/7 online service, Schwab is one of the brokers that want you to contact and ask anything regarding its services – we cannot say the same for many of its competitors.
The research and analysis features comprise advanced stock charting, momentum indicators, and watch lists but also fundamental research helping with stock market’s valuation (earnings, dividends, ratings, short interest, etc.). On top of that, StreetSmart Edge is fully customizable, includes alerts and order positions tiles, as well as basic to advanced options orders.
Schwab is active in all investment categories one may think of. As an investor, it is difficult to expect more from a brokerage house
Interactive Brokers – Best Package For Starters
Interactive Brokers offers services for both retail and institutional investors. It stands out from the pack as a broker that is best for gaining access to the worldwide markets. Interactive
IB offers a complete brokerage service. It not only caters to individual clients, but prop traders, family offices, hedge funds, money managers, and small businesses. This makes Interactive suitable for global traders. The company recently aggressive campaigning to encourage retailer traders, who can benefit from the experience, background, and resources the company gained through big business dealings.
While it may not be the cheapest broker around, the access to global financial markets, competitive pricing, and premium technology make Interactive an interesting proposition.
Robinhood – Best For Amateur Traders
Robinhood is one of the most popular brokerage platforms. With its introduction of fractional shares, Robinhood caters to traders who are cost-sensitive. The company also offers access to cryptocurrency markets.
Robinhood understands that while traditional brokers have more account types and cover more markets, they lack the ability for quick responses to customer changes. So, they aim to give clients the power to participate without the bulk from the traditional industry.
E-Trade – Best Education Source For Beginners
E-Trade is a complete financial advisor and brokerage service for residents in the USA. Both the desktop and mobile trading platforms offer in house assistance and tutorials. The E-Trade knowledge center covers most investment services and can be an invaluable resource for newbies who need an introduction into the world of financial market investments.
This platform suits active and passive investors. Active traders are likely to welcome the commission structure. E-Trade offers commission free trading on most stocks, mutual funds and ETFs, and low commission on options and futures. Passive investors will appreciate the variety of managed portfolios, as the advisory arm is one of E-Trade’s core strengths. E-Trade also has excellent retirement planning assistance, creating an ideal environment for beginners, particularly those new to the stock market.
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Online brokers still give you the same basic functionality as a traditional brokerage would, but they take away the hassle.
There are numerous advantages of having an online broker. The only major problem is that there are so many of them. As such, it can be difficult to decide which one you should go for.
Here, we will take a brief look at what you should know when selecting a broker. After that, we will dive deep into the brokers themselves and recommend a few for each type of investor.
First, let’s take a look at what exactly are online brokerages.
What Are Online Brokerage Accounts And How do They Work?
There are many ways to classify brokerage accounts. Broadly speaking, you can get a standard brokerage account (which is usually managed by an actual human broker), a discount brokerage account, and an online brokerage account.
Whereas discount brokerages offer fewer services compared to a managed brokerage account in exchange for lower fees, online brokerages take this concept to the extreme. Online brokerages seldom try to help you in any direct way.
For example, while you will have access to customer support, they will only be able to help you with technical problems. There won’t be anyone monitoring your portfolio and offering you tips on how to increase your net worth.
Due to excessive competition within the online brokerage space, online brokerages charge very little fees. It is not uncommon to see online brokerages offer zero-commission trading. However, just beware that these brokerages still make money off you in other ways.
What Should I Expect from an Online Brokerage?
An online brokerage will not help you in any major way when it comes to trading. While a quality online brokerage will have resources to help you master their platform as well as trading itself, you are mostly on your own.
As such, you will be directly responsible for all your gains and your losses. There will be an online terminal (or a desktop/mobile app) that you will be able to use to make all your trades and monitor them in real-time.
As such, you must know what you are doing before you begin trading through an online brokerage.
Types of Online Brokers for Stock Trading
Although online brokers are themselves considered a type of brokerage, there are ways through which it is possible to further classify online brokers. These ways are:
- Brokers that allow additional asset classes apart from stocks (e.g. cryptocurrency).
- Brokers that operate mainly through mobile apps.
- Brokers that have a high focus on providing extensive stock analysis tools.
- Brokers that aim to educate the traders as well as possible.
- Brokers that specialize in advanced financial instruments (e.g. derivatives such as options and futures).
It is up to you to decide which type of broker you are most comfortable with. For example, going with a broker that specializes in futures contracts as a beginner investor is a stupid idea. However, going with a broker that mainly operates through mobile apps might be a great way to start investing.
Similarly, if you are a beginner investor, your major focus should be on improving yourself and increasing your knowledge of the markets. Because of this, going with a broker that provides educational resources would be your best bet.
However, advanced traders who are looking for a new broker would prioritize different things. They would not only want access to complex products that could provide higher returns, but they would also want to make use of advanced trading tools.
How do Online Brokers Compare?
Before you can decide which online stockbroker is right for you, you must know the criteria on which they should be compared. Here are the major things that you need to watch out for:
- The trading platform
- Educational resources
- Customer and value-added services
- Ease of deposit and Withdrawal
Let’s dive a little deeper!
Just because a trading platform is complicated, doesn’t mean it is better. The trading platform should be as customizable as possible so that you can tailor it to your liking.
If you are a beginner, you should go with a platform that is the simplest. Conversely, an advanced trader should make sure that the platform has all the tools they need to be profitable.
While these resources are not necessary for a veteran trader (although they should also use them), beginners should place a high emphasis on this. Your broker will be in an ideal position to teach you more about the world of stock trading.
Being able to better understand what caused your trades to succeed or fail will help you make better decisions in the future.
When it comes to fees, never just go for the cheapest option. While the cheapest brokers will help you save money in the short-term, they still are going to be making a profit. They will do this by providing a service that is objectively worse than those of their slightly more expensive competitors.
It is best to compare the fees of a broker with the services that they provide. If a broker charges higher fees but also gives you more options when it comes to trading, then that broker might be right for you.
Customer Service and Additional Benefits
This is more than extremely important, especially when it comes to online brokerages. Because you are responsible for your actions, you need to be sure that technical issues do not end up resulting in a direct loss of capital for you.
As such, having a broker with adept and efficient customer service is compulsory. The easiest way to see if your broker has good customer service is to read user reviews (e.g. on Trustpilot). Professional reviews, while great for understanding the advantages of the service, do not tell you a lot about the customer service offered by the broker.
Ease of Deposit and Withdrawal
Lastly, make sure that it is easy to both deposit and withdraw funds from the broker.
Make sure that the broker supports the payment methods of your choosing and can get you the funds whenever you need them. This will save you a lot of hassle later.
The Benefits of an Online Brokerage
You may be thinking that you do not necessarily need to open an online brokerage account. After all, a managed brokerage might be able to better assist you. However, there are a few key benefits of an online brokerage.
These benefits tip the scale in the favor of online brokerages and are the reason why online brokerages are signing more customers than any other type of brokerage nowadays.
Let’s take a peek at some of the advantages that online brokerages offer:
- You end up paying lower fees than you would on any other type of broker. You will also find a lot of zero-commission brokerages that will charge you nothing for most of your trades. It is due to these low fees that we are starting to see consolidation in the online brokerage market.
- Since you are not receiving any financial advice from your broker, you can avoid brokerage bias. Brokerage bias essentially occurs when your broker gives you advice that benefits the broker itself.
- You will also have complete control over all of your investments. This, combined with the speed of online trading platforms, will allow you to instantly take advantage of opportunities in the markets.
- It is easy to monitor trades in real-time and make adjustments.
- You have access to online trading tools that, in some cases, can be extremely advanced. Just a few years ago, these tools were only available to gigantic organizations. Now, you can access them without paying any commission!
- You can trade from anywhere. As long as you have a supported device and an internet connection, you can turn a profit.
The Drawbacks of an Online Brokerage
While online brokerages offer a great many benefits as compared to traditional brokerages, they are not perfect. Before you opt for an online brokerage, here are some things that you need to be aware of:
- You must learn the ins and outs of the trading platform before you can use it to its fullest potential.
- Any additional service (such as using the phone to place your order if applicable) will cost exorbitantly more than a traditional broker.
- You are reliant on the internet for your trading. If your connection fails, you will not be able to trade.
- You are responsible for figuring everything out (this doesn’t just relate to trading, but also other things such as taxes).
- There is nobody there to keep you in check. If you start to trade way too much because you think you can make up your earlier losses, it is possible to lose all your capital in one sitting (many traders have done that). It is best to have rules that keep you from losing too much during single sessions and follow them stringently.
What Are the Most Important Trading Tools for Stock Trading?
Many tools can be used to facilitate the trading of stocks. However, the tools that are important to you depend on whether you want to be an investor or a trader.
Investors generally use fundamental analysis and invest for the long-term, whereas traders use technical analysis and hold positions for short amounts of time. We explore both investing and trading in detail later.
1. Tools for Investors
For investing, here are some tools that can help investors better conduct their research:
- Access to company reports and financial statements.
- Quick access to news about the company.
- Data that stretches back quite a bit (many investors take a look at company fundamentals stretching as far back as 10 years).
- Calculators that can help you quickly calculate major financial ratios.
- Know-how of models such as the Discounted Cash Flow (DCF) analysis.
2. Tools for Traders
Traders usually make use of charting and other technical methods to turn a profit. As such, the tools that they need are vastly different from those of investors. Here are some of the most important ones:
- A competent trading platform that can keep up with their pace.
- A good laptop/computer that can handle real-time charting fairly well (multiple screens might be preferable for advanced traders).
- A trading journal to help manage their performance.
- A list of strategies that they can use to turn a profit in both bull and bear markets.
Should I Open a Cash or a Margin Account?
The major difference between a cash and a margin account is the fact that margin accounts allow you to use leverage. Without making it too complicated, leverage allows you to multiply both your gains and your losses by borrowing money from your broker to increase the size of your trades.
Remember that using leverage carries a lot of risks. If the leverage is high enough, it is possible to lose a significant chunk of your capital overnight.
As such, most beginner investors should stay away from margin accounts. A cash account is much safer, and while it will not allow you to get amazing returns, it will also keep your risk in check.
Advanced traders who know how leverage works and know how to hedge their portfolio against sudden movements can use margin accounts to their benefit. By controlling their downside risks and spotting opportunities in the markets, leveraged traders can increase their capital exponentially.
Even intermediate traders who are thinking of opening a margin account should first try trading on margin using a demo account. Only when they are able to consistently turn out a profit on their demo accounts should they spring for an actual margin account from an online brokerage.
Now that you know what to look for in a broker, let’s look at some of the options that are available to you:
Best Online Brokers for Non-US Residents
Almost everybody in the world wants exposure to the US markets. After all, they are by far the biggest markets with the world’s largest companies. However, the process for trading in the US can be a bit complicated for non-US residents.
Thankfully, there are brokers out there who can help you trade US stocks without having to go through an unnecessarily long process. Here are our top picks:
Interactive Brokers is a service that is ideal for trading across a wide variety of exchanges. Apart from the US markets, it can also provide you access to other exchanges including the Hong Kong, Japanese, and the Dutch exchange.
While the quality provided by Interactive Brokers is not exceptional e.g. their customer service is notoriously terrible, they provide a service that only a few others can match. Non-US residents will be hard-pressed to find a better solution than Interactive.
TradeZero is a good alternative for those who cannot or do not want to use Interactive Brokers. The main advantage (that is also a disadvantage) that TradeZero has over Interactive is that it is not regulated by the SEC. As such, you have a lot more freedom when it comes to making trades e.g. you can day trade with less than $25,000 in your account. Also, the platform is a lot simpler and better suited for beginners.
Still, it fails to compete in terms of the asset classes offered. It only offers ETFs, Stocks, Warrants, and Options. As such, many advanced traders would not find the platform sufficient for their needs.
Best Mobile Apps for Stock Trading
Being able to trade straight from your phone is a huge blessing. This means that not only can you trade from anywhere, but there is no reason to carry a bulky laptop (and charge it). Here are some of the best mobile apps that you can use to trade stocks.
This is a name that is familiar to almost everyone in the stock trading world. Since Robinhood was founded in 2013, it has gone from strength to strength.
Not only is the app extremely easy to use, but it offers unparalleled functionality when it comes to the advanced stuff. You can pretty much invest in anything from stocks to ETFs to Options. On top of that, you also have the option to trade cryptocurrency.
However, just beware that the app provides limited customer support and does not support certain alternative investments such as mutual funds and money-market instruments.
If you want to invest through your phone, chances are that you do not want to go through the complexities of a robust trading platform. If so, Acorns is perfect for you.
Acorns was founded with one goal in mind: to make investing as simple as it can get. Acorns makes use of something called Robo-advisors to automatically allocate resources depending on your investment needs and goals. As such, it is a great option for someone that wants to invest their money but lacks the know-how.
Best Brokers for Crypto Trading
Cryptocurrency is a relatively new asset. In fact, it is only after 2015 that it has started to pick up steam. As such, not a lot of major brokerages allow you to purchase cryptocurrency.
While you can always use a cryptocurrency exchange if you only want to trade cryptocurrency, they offer limited functionality when it comes to traditional financial vehicles.
Here are two brokerages that allow you to trade crypto:
eToro is by far your best bet when it comes to purchasing cryptocurrencies. In fact, it may just be the most diverse brokerage around. You can trade anything from stocks and ETFs to crypto and forex.
However, just remember that your choice of cryptocurrencies is somewhat limited. If you want to trade obscure cryptocurrencies, a crypto exchange is better.
Along with being a great mobile app, Robinhood also allows you to purchase crypto. Once again, your options are limited to a handful of currencies.
However, nothing can beat Robinhood in terms of convenience and ease of use.
Best Brokers for Stock Analysis
If you are an advanced trader, you would like access to advanced tools. If you want, you can use third-party trading software that can help you better analyze the markets.
However, if you want your brokerage to provide everything, here are the brokers with the best trading platforms:
Fidelity is generally considered the best brokerage by a large part of the investing community. This is because of their extremely well-built website, their competent platform to analyze stocks and other investments, and their brilliant order execution.
If you were to ask us to recommend one broker that would be great for almost everyone, Fidelity Investments is probably going to be our answer.
We mentioned above that complexity could be one of the weak points of Interactive Brokers. While that’s true, one of the reasons it is so complex is because it gives its users a lot of ways to conduct analysis and develop their strategies.
Because Interactive Brokers also allow you to invest in a wide variety of other assets, advanced trades should definitely consider using Interactive.
Best Brokers for Options Trading
Options are considered advanced instruments. Usually, you need to sign an additional agreement with your broker to trade options. This agreement protects the brokerage from lawsuits in case you lose your capital trading options.
However, this does not mean that options trading is a scam. On the contrary, it is possible to make returns that are unheard of in options trading if you know what you are doing.
Here are some of our favorite brokers for options trading:
E*TRADE not only offers options trading, but it is also incredibly simple to use. As such, it would be perfect for a beginner investor looking to move into the world of options trading.
E*TRADE has a very competent but simple web app, along with a host of other tools to help you trade options. Also, if you do not feel like trading is for you, you can opt for a managed account later on.
Anybody even slightly interested in the world of finance has heard of Merrill Lynch. Merrill Edge is a service that specifically aims to provide brokerage services to clients online.
Since it is owned by a company that has a history of trading complex financial instruments, it’s not a surprise to see that its platform is set up perfectly to trade options and other derivatives.
Best Brokers with Great Education Tools
Before we move on to the next section, we will be looking at a few brokers that also educate their users very well. These brokers, although helpful for everyone, will be perfect for beginner investors.
TD Ameritrade, along with Fidelity, is one of the biggest brokerages in the entire world. As such, it is no surprise that they place a special emphasis on the education of their customers.
On top of that, their recent merger with Charles Schwab will put them in a position to offer cheaper services than most of the competition.
Fidelity is considered one of the most beginner-friendly brokerages, even though even the most advanced traders in the world use it. One of the main reasons for this is the fact that Fidelity provides some of the best educational resources to its users.
Even if something on the platform seems a little intimidating, there will almost certainly be a guide on how you can master it. This makes Fidelity an ideal platform for someone who is new to treading but wants to hone their skills!
Tips for Choosing an Online Brokerage
Now that you have taken a look at some of the best brokers for each category, your list of optimal brokerages should be narrowed down considerably. However, you still probably need to pick one broker from a handful.
To help you make the decision, here is a step by step guide on how you can decide which brokerage is right for you:
- Decide what you want. Would you feel more comfortable using a mobile app or a fully-fledged trading system? Do you want to spend a lot of time learning? Is the facility to trade options important for you? Take a look at all the features you will need.
- Make a list of the brokers that satisfy your requirements.
- Now, compare these brokers based on their fee structure.
- Remember to compare the features and services that the brokerage offers with the fee it charges. A better broker should be able to charge slightly higher fees as it provides a better service.
- Once you have sufficiently narrowed down the list, test the trading platform of the broker. See if the brokerages have a platform that is too complicated, or too buggy, or too basic for your needs.
- Try to compare the brokers based on their customer service (remember to read customer reviews) and educational platforms.
- If you are still unable to make a decision, then try to ask your friends and other people you know about the brokerages in question. Just remember that while you should hear out the opinions of people you know, they should never be the sole reason for your decision. Always do your own research!
If you have decided to go with a brokerage that is not very well known, make sure to confirm that they are legitimate. Illegitimate brokers, even if they intend to run an honest business, carry a lot of risks such as the lack of insurance by FINRA and SIPC.
Online Brokers for Stock Trading: What Features Should Investors Look For?
Investors usually plan to hold the shares that they are purchasing. As such, as an investor, the fee that you pay for purchasing shares should not be of the utmost importance to you.
Instead, you need a broker that has low maintenance and other fees. You should also look for a broker that can help you research by providing you as many of the fundamental analysis tools as possible within its trading platform.
As an investor, you will probably be doing a lot more research before you decide that a stock is worth investing in. Not only that, but you will also be looking for value elsewhere.
For example, you may want to purchase long options on a particular stock rather than the stock itself. As such, you should carefully vet each brokerage to make sure that it can let you invest in anything you want before selecting it.
Lastly, you may also want to go with a broker that provides you access to research. Although you should always do your own research before each investment, having a second opinion in the form of a research report could provide you with valuable insights.
Online Brokers for Stock Trading: What Features Should Traders Look For?
The needs of a trader are vastly different than that of an investor. The first thing that you should look for is a competent trading platform. As mentioned previously in this guide, the platform should be able to keep up with your pace and provide you with all the tools that you need.
You should also make sure that your broker supports all of the various order types that you plan to perform.
Apart from this, confirm that the brokerage supports trading in all the various asset classes that you want to trade. Some traders focus only on stocks, whereas others diversify across forex, cryptocurrencies, and derivatives. (Note: you should only trade in the asset classes that you are comfortable in. Trading something that you don’t understand could lead to unforeseen losses).
If you have decided that you are going to open a margin account, then you will also want to take a look at the terms upon which the leverage is provided. Also, remember that you can only use a specific amount of leverage (e.g. a maximum of 10x) on certain assets. Look at the assets that you are going to be trading on margin and compare the leverage offered by various brokers on them.
What is a Paper Trading Account?
A paper trading account is an account that performs simulated trades. You will be using fake funds to conduct trades. However, the results of the trades would be the same as they would be if you were using real cash.
You can open both a cash and a margin paper trading account. It is advisable for all new traders and investors to first hone their skills through a paper trading account, as it can help you develop composure and finetune your strategies.
Almost all of the online brokers offer some kind of a paper trading account. This account should not only be used by new investors to test their skills, but also to test the brokers. The trading platform used in your paper trading account will be the same as the one in an actual brokerage account.
Simply put, make the maximum use of a paper trading account by testing anything that you are unsure of. Whether it’s a new broker or a new strategy, a paper trading account can help put your doubts at rest.
Please keep in mind:
INVESTMENT AND INSURANCE PRODUCTS ARE:
NOT A DEPOSIT • NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE