Where to start
When you consider all the options included from online brokers, the task of narrowing down a selection can be daunting. In addition to the many options & features that are available, many of the brokers offer different benefits compared to other brokers. With this in mind, I’ve decided to help guide your selection process by highlighting some of the main consideration points that you’ll want to compare when making your selections.
Keep in mind that choosing just one broker may not be the right choice either. In reality most traders will need to open accounts at a few brokerages to get each of their specific trading strategies up and running.
This is usually the first consideration taken into account by traders and is the most obvious metric that almost everyone looks at. While at a simple level, it’s easy to compare brokers on how much they charge per trade ($7.99 or $9.99 for example).
I want to caution you on looking just at this cost. There are other fees which are not promoted as heavily that you must also take into account. In fact, there are fees for international trade execution, live trading assistance, options contracts and more. If you plan to use these services, make sure that they don’t increase your total trade costs too much.
One such point is how much you are charged for trading options contracts. As an example, you can be charged the up-front trading fee of $9.99 and then a per contract fee of $0.75. If you trade a lot of options contracts, this can cost you a lot of money. There are brokers out there that specialize in options trading where you can trade options contracts for much less. Make sure that you understand your total cost based on the strategy you plan to use.
A lot of brokers provide different benefits that may be important to you. For instance, TD Ameritrade offers options, Forex, futures, stocks and bonds through their various platforms. It’s critical to consider this if you’re looking to trade more than just stocks. It’s a lot easier to have an account with one broker for broader trading capabilities than having to manage several accounts across multiple providers.
If you’re looking to trade stocks on other stock exchanges, you’ll need to make sure that your broker can actually provide this. Only a few brokers like Fidelity will actually give you both the ability to trade international markets and access to most of the foreign stock exchanges. Otherwise you’ll have to just buy ETF’s or will only be able to buy the few international stocks available in the US markets.
Some brokers will give you more margin capabilities than others, which will allow you to leverage your money more and make higher returns. However, the rates that are charged also vary widely, so it’s important to look at the rate you’ll be charged by your broker of choice. Some combination of lower rates and higher margin allowance is what you want to find.