Platform & Tools
Fees & Commissions
Education & Resources
Online Stock Trading Review
Why Choose Online Stock Trading?
OptionsHouse receives our Top Ten Reviews Gold Award for its combination of low-cost, easy-to-use platforms and a wide range of educational tools. Trades have a low cost of $4.95 for stocks, options and ETFs. This trading platform is suitable for traders of all levels and excelled in our tests for both advanced and beginning investors. If you’re new to online stock trading you will appreciate its simple platform, which allows you to make trades quickly from anywhere in the platform. More experienced traders will find a wide range of analytic tools to help guide their trading decisions. The platform is also well suited for options trading, with 15 preset options strategies and tools to help you forecast potential returns. There is also no minimum investment to start trading with OptionsHouse.
Best Low-Cost Stock Trading:
If cost is one of your main concerns when looking for an online broker, Fidelity, our Top Ten Reviews Silver Award winner, is one of the standouts. Basic trades of stocks cost $4.95. If you are interested in trading ETFs, Fidelity offers a range of commission-free ETFs managed by Fidelity or iShares. Other ETFs will cost $4.95 to trade. Options traders will pay $4.95 per trade plus $0.65 per contract. One drawback is that Fidelity requires an initial investment of at least $2,500, which is much higher than other brokers we reviewed.
Best Trading Tools:
TD Ameritrade’s analytic trading tools are among the best we reviewed. This well-known service wins our Top Ten Reviews Bronze Award. With over 300 technical indicators, its thinkorswim platform has more than double the indicators of its closest competitor. These indicators can help you spot trends and make trading decisions. If you’re pursuing a longer-term trading strategy, TD Ameritrade has forecasting tools to help you gauge the long-term prospects of your positions. You can also take advantage of a paper money account to practice on the platform and test out strategies before you make actual trades.
How We Ranked the Best Online Stock Brokers
We looked for online brokers with a recognizable brand name, an online platform and a mobile app. We only compared trading platforms that include analytic tools and options trading. For this reason, we did not evaluate less versatile brokers such as Robin Hood and Motif. We contacted each broker in our comparison to get access to their trading platform so our reviewers could test all the features and not a scaled-down demo.
What We Tested and What We Found
To test online trading services, our reviewers used the desktop platform and mobile app from each broker. Our reviewers varied significantly in trading experience. Each reviewer began by making a simple trade then setting up watch lists and alerts. Next the reviewers moved to advanced trades and set up option chains. They examined the charting tools and then looked to see how easy it was to connect to a bank and to tax programs. They followed that same procedure with the mobile apps.
Once they’d finished their tests, our reviewers got together and compared results. Here’s what they found:
Ease of Use:
The best platforms make it very simple to place trades, either through a main dashboard, or through a watch list. Some platforms were difficult to navigate and required multiple steps to find the securities you want to trade. The best platforms give multiple alert options for more advanced criteria than simple price movements. We also took advanced stock trading into account and looked at the options tools to see how simple it was to set up and manage option chains.
Mobile stock trading is becoming more and more popular, so a good app is important to look for. Quality apps offer portable versions of the main platform, allowing you to trade, set alerts and fund accounts on the go. Mobile apps that scored low typically didn’t allow us to set alerts or add funds to our trading accounts.
Other Factors to Consider
While the trading platform may be one of the most important aspects of online stock trading, there are other factors that we considered as we rated online brokers.
Cost is probably the first thing you’ll look for when you start online investing. Recently, many of the brokers in our lineup cut their prices, some quite dramatically. The average commission price has dropped nearly a dollar since our last update a year ago. The price for making a trade ranges from $4.95 to $8.99. Options traders will want to pay attention to contract fees. These may seem small, ranging from $0.40 to $1.50 per contract, but if you trade a large sum of options contracts, this may end up being much higher than the trade commission.
The minimum investment is another number you’ll want to look at. Many of the brokers we reviewed don’t require any minimum balance to start trading. Of the brokers that do have a minimum, TradeStation’s is the highest at $5,000 and E*TRADE’s is the lowest at $500.
We included margin rates but did not factor them into our scoring. The interest you’ll pay on a margin account varies depending on how much money you have in your account. Margin rates fluctuate depending on a variety of external economic factors.
In addition to online platforms and mobile apps, we looked at some of the other trading tools offered by each broker. Technical indicators allow you to examine market trends; most traders find a few they like to use, but we did consider the total number offered. TD Ameritrade outpaced all other brokers, offering over 300 different technical indicators.
Other useful tools we looked for include a forecasting tool and risk vs. reward analysis, both of which can give you long-term perspective on your positions.
When you begin online trading, be sure to investigate the educational resources the broker offers. Our reviewers looked at both the platform training and the investment education offered by each broker on our lineup.
Stock brokers that scored high in this category provided not only a thorough knowledgebase, but video tutorials and step-by-step training on a broad array of topics beyond the basic features of the program.
Even experienced investors can take advantage of the educational resources offered by each of these brokers. All the sites we reviewed offered some combination of blogs, webinars, articles and courses about investing. This kind of information is invaluable in teaching you how to buy stocks online. The best brokers had searchable archives and updated constantly. Fidelity and E*TRADE are two of the brokers that impressed us the most with the information they provided to investors.
Stock Trading Basics
Why Should You Invest in Stocks?
Historically, the stock market has outperformed many other investment types, so starting to invest money in stocks might be a great idea for you. Investing can seem complicated and hard to understand so it’s important to cover some of the basics.
When you invest in stocks you are literally buying and selling shares in a company. When that company increases in value, the value of your stocks increases as well. To trade stocks you need to use a broker. A stock broker is someone who receives an order to buy or sell a stock from you, and then goes and makes the trade. Most modern investors use online stock trading websites to buy, sell and monitor their investments in the stock market.
One reason people don’t invest in the stock market is the assumption that investing in stocks is only for the super-rich. While trading does have a cost – and looking for the best low-cost stock trading online should be a priority – there are some things you should know about the costs of investing.
First, there are very few brokers who let you trade stocks for free. Almost all brokers charge a standard fee per stock or option trade. This fee is called a commission. As a beginner, you probably won't be trading a high volume of stocks, so the difference in pricing may not be a big factor in your decision. But these costs can add up.
Second, it’s important to research how much a broker requires you to invest initially. Many of the brokers in our review don't require a minimum investment but some brokers require initial investments up to $5,000. With some brokerages, a minimum starting investment may be required to gain access to a set of premier features. With TD Ameritrade, there is no minimum investment, but if you want to trade options or open a margin account you need to invest $2,000. If you want access to ScottradeELITE, Scottrade’s desktop trading platform, your account must have a balance of $25,000. These initial investments can significantly add to the cost of trading stocks.
Beginning Investor Education
In our stock broker reviews, we paid attention to the general resources brokers provide about the stock market. The best online stock trading websites for beginners offer investor education that includes courses covering a wide variety of topics. If you’re a beginner, you may not be well versed in the jargon of the investment world. Courses on finance and investing basics can help give you a solid footing before you begin investing. E*TRADE's courses are the most in-depth of any broker we reviewed, and its courses include quizzes that test your knowledge.
Whichever broker you choose, if you’re new to investing be sure to look at the resources it provides to help you learn your way around a trading platform and investing generally.
What Should I Invest In?
We can test every platform and provide you with details about pricing, tools and training, but ultimately the decision about what to trade and when to buy and sell rests with you.
Investing can be as simple or as complicated as you want. The decision of where to put your money depends on your tolerance of risk. Riskier investments bring the potential for greater returns but also greater losses. Safer investments may not bring huge rewards, but you are less likely to lose money on your investments.
One way investors try to manage risk is by diversifying. Spreading your risk by investing in a wide spectrum of stocks and bonds can reduce the impact of any one investment turning sour.
Trading stocks can also impact your taxes. Any profits you make are subject to capital gains taxes. Assets that you sell after holding for a year or less are taxed at a higher rate than those you hold for longer than a year.
While we can’t recommend specific stocks or securities to invest in, we can recommend broad strategies that suit a variety of investing profiles. You can also read our articles about investing. This article about how to invest amounts ranging from $100 to $10,000 may be particularly helpful.
- If You Are Risk Adverse: If you want to put your money to use but are wary of the ups and downs the market can take, buying index fund ETFs may be the wisest choice. Index funds are among the most popular and easiest ways to invest, and many are available as ETFs that you can purchase the same way you would a stock. Many brokerages also offer commission-free ETFs, which can lower your costs even more.
- If You Are Thinking Long Term: Stocks are perhaps the most fundamental, and one of the most reliable, types of investments available. A buy-and-hold strategy with a stable, established company can have many benefits. These stocks can grow faster than the rest of the market, giving them an advantage over index funds that track closely to the market. Often these are companies that have proven longevity, so you won’t have to worry about them being flashes-in-the-pan. These stocks typically pay dividends, which give you a portion a company’s earnings.
- If You Want Something Riskier: There’s a potential for greater rewards if you trade stability for riskier investments. Options Trading, Day Trading and Forex are all more complex investments that require more skill and knowledge than simple buy-and-hold strategies. Most of the brokers provide training, tools and resources for these types of trading. It can take patience to learn effective strategies for these types of trading, but if you put in the effort to learn, there’s the potential for it to pay off.
- Another type of risky investment is penny stocks. These are stocks that trade for $5 or below, but more importantly are not sold on major exchanges and are rather listed on Pink Sheets or the Over-the-Counter Bulletin Board. These stocks are typically more volatile than stocks traded on other exchanges and have less liquidity. There’s also less oversight, making penny stock investors frequent targets of scams.
There are many misconceptions about penny stocks, including that large companies such as Microsoft began as penny stocks and the potential exists for current penny stocks to explode in value. The truth is that most penny stocks rarely exceed the $5 threshold. Several brokers we reviewed, including Charles Schwab, E*TRADE and TD Ameritrade, allow you to trade penny stocks. However, we certainly advise not risking much on these highly volatile shares.
What Every Trader Should Know Before Starting Online
If you’ve settled on a broker and decided what and how you’ll trade, there are a few other things you’ll want to consider before you sign on and start trading. Again, these can vary depending on your experience level and which securities you decide you trade.
- Diversify: This is perhaps the most common investing tip, and for good reason. A diversified portfolio can help you avoid risk by spreading it across many stocks and other securities from a variety of sectors.
- Risk: When you begin trading you’ll need to figure out your appetite for risk. This applies for both day-to-day trading and long-term strategies. Different investments carry different levels of risk; day trading and forex are both considered risky since they are short-term investments and are susceptible to severe price fluctuations. You’ll also want to evaluate your risk tolerance and set a stop-loss that will automatically sell your investments before they drop below a certain threshold.
- When to Buy: Whether you’re putting your money into ETFs, individual stocks or another investment, timing can be crucial. If you want to buy shares of a company, it can require a lot of research on when to enter a position. Sometimes it’s as simple as buying in when the stock hits a certain price. Other times you may want to find a stock that is being undervalued. Finding the right stock to buy requires research into more than just the history of the stock price; you may need to do some digging into the finances of the company you’re thinking of buying stock in.
- When to Sell: This is one of the hardest things for a trader to learn. When one of your stocks starts heading south, it’s tempting to hold on to it. But if the stock doesn’t bounce back up, you risk hurting more than your pride. The best traders can admit when they’ve gotten something wrong. Use the tools in your platform to set stop-loss orders so you can get out of a position quickly. This may not be as relevant for long-term trading strategies, but it is still something you’ll need to consider when making trades.
More Online Broker Recommendations
In addition to our top three brokers, here are some recommendations for brokers that are standouts in other categories.
Best Mobile Trading App
E*TRADE provides a mobile app that rates among the best we reviewed. The app gives you many of the features of the main platform, including advanced quotes, watch lists and stock screeners. Alerts can be created and customized through the app, and E*TRADE’s mobile app syncs with the online platform, so any watch lists you’ve made on one platform is visible on the other.
Best Simulated Trading Tools
Simulated trading, sometimes called paper trading, allows you to test strategies and learn the program before you start trading with actual money. Many of the brokers in our review offer this feature, but optionsXpress stood out to us. You can use optionsXpress’s broad range of trading tools, including forecasting and risk vs. reward analysis to see how strategies you might want to use perform. You’ll be provided with $25,000 worth of virtual cash to trade with.
Stock trading and online investing offer great potential for earning money. Choosing the right broker can be a challenge. We’ve tested each of these 12 brokers, using their online and mobile platforms, evaluating their tools and comparing prices to come up with this ranking of the best online stock trading brokers.