How to Choose the Right Online Stock Trading Broker for You

I've been trading stocks online since 1998. I've been through a bunch of online stock brokers.

I started with TD Canada Trust, which treated me to "bargain-basement" commissions of $39.95 per trade. Like everyone else on the planet, I bailed once I heard of E-Trade, and switched my account over. The problem with E-Trade was that at the time, they were not reliable, and often went down on extremely heavy volume market days (just the day that you usually want to sell or buy something.) After that, I switched over to Cybertrader, which offered decent commissions but a tremendous suite of trading tools. Cybertrader was my home for years, until Cybertrader was forced to close my account because they didn't have a physical office in Canada, and according to Canadian securities law, a company must have a physical office in Canada in order to accept Canadian clients (stupid, I know.) Eventually, after months of foot-dragging by the Canadian government, Cybertrader finally partnered with a company called Questrade in Canada, and I was able to trade at Cybertrader again via Questrade.

So that's my story. What's your story? In order to properly select an online stock broker, you need to first ask yourself the question: how much am I planning on trading?

If you are a fairly active trader, meaning once a day or more, I would highly recommend that you open an account at an online brokerages which can give you the tools necessary to proper move in and out of stocks. In your case, it is nice to have a broker that offers level II quotes and the ability to easily track baskets of stocks. You should also go with a broker that offers a per share commissions, instead of a flat rate commission. You should avoid opening an account at your bank's online stock brokerage; it may be tempting, as your brokerage account and bank account will be linked, but I can guarantee you that you will suffer from high commissions and sub-standard service. If you are a fairly active trader, I would highly recommend Cybertrader.com, as I have been using them for years with no problems. And no, they aren't paying me to say this.

If you don't trade that much, let's say maybe a couple of times per month at the most, then I would recommend something that is cheap and bare bones but still gets the job done. Interactivebrokers.com is the company for you. Bargain basement commissions, but tons of functionality. They are a hugely popular publicly traded company, so don't let their thrifty nature fool you; they are a proven and very popular company. If you are looking to keep your commission and data costs down, they are the brokerage for you. If you need a bit more of the bells and whistles, then I would recommend Cybertrader. Either way, you can't really go wrong. Just avoid the banks for your online brokerage account, you'll thank me later.

Filed under: Stock Market Education | General Knowledge