This is a question that was emailed to me yesterday. And honestly, I'm probably not the best person to be giving advice, but I have had my fair share of experience with different brokerages, so I'll give it a shot.
Personally, the biggest thing I look for in a brokerage is the commission fee. For small time investors (like me, and probably you) commissions can make the difference between a gain and a loss. When your buying thousands of dollars worth of stock, a $10 commission is noise. However, when your trading $100 dollars worth of stocks, $10 represents a 10% hit right off the bat, and then it will also take a chunk out of the money you end up selling a stock for. I got in a position with E*Trade where I bought $100 worth of a stock but couldn't sell after a 20% jump because i would actually loose money due to the commissions. Taking into account how much the commission is can not only help you choose a broker, but help you choose the amount your going to invest.
Watch for hidden fees as well. Some brokers offer low fees, but only under certain conditions. One place fees arise that has hurt me is when trading penny stocks. Make sure there are not penalties for investing in low price stocks, or buying a large number of shares.
Secondly, I look for is how easy the site is to use, primarily how easy it is to transfer funds into the account. Most accounts offer transfers straight from your bank account, but it may take days, or weeks, to get these external accounts verified. Also, watch out for holding periods on transfers, as it may interfere with your trading.
Lastly, I look for services of the site. Most small time traders are pretty much put on the back burner when it comes to services of the site, and that's probably okay. By doing your own research and coming up with your own thesis on stocks, not only are you actively involved in your investments, but your probably having fun and learning. You also are probably doing better than many of the financial ad visors who you would be paying to do the work for you. Sites that boast lots of services probably are going to slam you with huge commissions, which is waaaay worse than having to do your own research.
Personally, I have accounts with E*TRADE and Tradeking. I primarily use the E*TRADE account, simply because it has turned out to be the better deal for day trading and penny stocks. Below I've summarized some popular Internet brokerages, I've tried to focus on ones with cheap commissions. The information is based on use of a basic account with the minimum amount invested (usually under $25,000) if you have an account with more than that in it, talk to me about taking over this blog. Of course, you should do your own research and make the decision that is best for you.
Commissions By Site
- E*TRADE -$12.99 per trade, unlimited OTC shares, for listed shares (NYSE, NASDAQ etc...) $.015/share cost for orders greater than2000 shares.
- Tradeking $4.95 per trade, add $.01 per share for stocks under $2.
- Scottrade $7.00 per trade, add $.01 per share for stocks under $1.
- TD Ameritrade $9.99 per trade. No restrictions on OTC stocks, no fees for large orders. Free month of trading with opening of account $2,000 or greater.
- Think or Swim $9.99 per trade OR $.015 per share ($5.00 min fee) for orders less than 5,000. For OTC stocks, $20 for 20,000 shares, $30 for 50,000 shares and $50 for unlimted shares.
- Zecco $4.50 per trade. If account balance is $2,500 or greater, first 10 trades of the month are free.
1 comment:
This was really helpful, someof those commissions are really cheap...
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