The top performers in our review are Options House, the Gold Award winner; Fidelity, the Silver Award winner; and Trade King, the Bronze Award winner. Here’s more on choosing a system to meet your needs, along with details on how we arrived at our ranking of 12 companies.
In the past, floor trading and phone trading, via communication with a broker who ordered and completed your trades, were the only choices for trading equity shares and other investment vehicles in the stock market. In the past few decades, online stock trading has replaced those dated means of buying and selling stocks. Online discount brokers provide platforms from where anyone from a first-time trader to experienced day traders can research, monitor and order trades.
A number of well-established online brokers provide their clients with access to stock markets. The best online stock trading services offer a solid platform with powerful researching and trading tools. All platforms differ, including their customizability and their design, and each service offers different levels of education and support. All brokers differ in their fees, so there is a range that you can expect to see. However, with some services, you pay more for the name and reputation, while lesser-known brands may charge less for trades. In our online stock trading reviews, you can learn about the features each platform includes and doesn't include, the fees you can expect to pay for stock and options trading, and support services offered.
What Every Online Investor Should Know
When you're involved with trading in the stock market, you should understand as much as you can about how to trade stocks online and about the investments vehicles you choose to trade, as there are many choices and those choices comes with varying degrees of risk. As is the case in most situations, the higher the risk, the higher the potential loss but, conversely, the higher the potential payoff. Outside forces affect the performance of stocks, including natural disasters, weather, world events and even civil unrest in foreign countries. Read our articles on online stock investing to learn even more.
Risks vs. Reward
Risk versus reward is a common phrase in the stock market because their correlation affects every investment. Where there is little risk of loss, there is also smaller potential for reward. And the opposite is true, that the higher the risk, the higher potential payoff. Just like in Vegas, if you win when the odds are stacked against you, your payoff can be enormous.
The decision to play it safe or play the odds depends on your trading strategy, your portfolio goals and the amount of money you choose to invest. Many investors choose to stay with simple stock trading, in which case you buy and sell stocks online at face value. Their value may increase and you'll see capital so you sell, or their value may decrease, so you sell before your loss becomes substantial. Or you may sit on a stock for years, taking a risk that the stock will make an upswing, increasing in value over time. Investment vehicles have varying levels of risk, from low-risk bonds and mutual funds to high-risk futures and Forex trading, which not all services on our online brokerage comparison offer. Read our guide on investment vehicles to learn the differences in investment choices.
Factors Affecting the Stock Market
The stock market is always shifting, but certain factors can create immediate changes or crashes, whether large or small. Many factors can contribute to market volatility, including internal and external events and forces. World events play a factor in market outlook and on supply and demand, among other facets of the market as well. Natural disasters, war and civil unrest can have negative impacts on the market and stock prices.
One of the greatest factors that affects the market is the outlook on the market itself. When the outlook of the market is more bearish and investors expect a downward move in the market's general trend, investors expect widespread losses that cause low sales and actualized losses, which creates a downward spiral. On the other hand, in a bullish market, investors expect prices to rise, which increases buying and optimism in the stock market.
Economics are a huge driving force of the market, and supply and demand has an obvious effect on market prices. Droughts can affect crops, driving up the prices of the commodity while an abundance of another commodity as the result of a favorable growing season can lower prices. Supply and demand may also be artificially manipulated to either increase or decrease the price of specific commodities.
What to Look for in a Good Online Brokerage
With all online brokers, you should expect certain features. These include tools to research and monitor stocks, features to manage your portfolio and assess the risk of your positions, and powerful reporting and charting choices. The best online trading platforms – whether online, desktop or mobile – offer many powerful tools and reporting options.
Research & Monitoring Tools
Research features are standard, including real-time quotes providing the current buying and selling points of a stock. Screeners allow you to set parameters and specific metrics to filter by elements, including price, P/E ratio, volume, ROI and yield, among other options. These advanced filtering options allow you to watch only the stocks that meet the criteria you set for your trading strategy.
For those stocks, you also can create watchlists, showing multiple buying and selling points for a particular stock. Option chains show multiple bid, ask and strike prices for call and put options for a stock so you can find contracts that fit the parameters you're hoping for in an option contract.
Reporting & Charting
Streaming charts provide visual representations of watchlists and screeners for quick views of stocks and their performances. Many of these charts monitor down to the minute. Bar graphs and candlestick charts are common, complete with red and green color-coding to indicate a rise or fall in the performance and opening, closing and actual trade costs for a particular stock or trading pair. TD Ameritrade's thinkorswim platform offers more analytic charts and technical studies than any other platform we reviewed, with hundreds of interactive choices.
The ability to add technical indicators is a useful customization option that advanced traders find invaluable when monitoring stocks and Forex trends. optionsXpress offers 39 technical indicators, including momentum, trend and volume indicators. It also offers drawing tools to create trend and resistance lines and to access the Fibonacci retracement, fans, arcs and time series.
What We Evaluated; What We Found
When choosing the best stock trading site for you, you want to find one that offers the features and options that match your trading strategy. Some of those considerations are the trading platform's ease of use and the functionality of the mobile platform. The cost of investing with a specific broker may be a consideration, and if you're new to the market or just to the platform, the support and education a broker offers can be of the utmost importance.
We tested each of the platforms on our lineup to evaluate the ease of use and functionality. We set up watchlists and alerts, created option chains, filled out the trade ticket, and played around with customization. We performed research using the available analytic tools and charting options. We also downloaded the mobile trading app for each service, connecting to the online account, performing research and looking at funding options. For each service, we created a proprietary score for both the trading platform and the mobile app.
The scores for Platform Ease of Use reflect our experience using the online or desktop platforms. Overall, we found the online OptionsHouse to be an all-around solid choice. The online platform is simple to navigate and intuitive. TD Ameritrade's thinkorswim desktop platform is also a great choice, albeit a more advanced platform. It can be less intuitive than many online platforms, but it offers more options for charting analysis than any other service on our lineup.
All of the best online brokerages offer mobile trading. Mobile platforms across the board allow you to research and trade stocks, but some are not as easy to use or are not offered on all mobile devices. When evaluating and creating our Mobile App Functionality score, we looked at the ability to create and edit watchlists, perform research, and fund accounts from the app.
The benefit of a discount online broker is that you can perform your own trades at lower cost than directly paying a stock broker. Most services have set trading fees, but some offer tiered trading costs. The benefit of tiered commission schedules is that the more you trade, the cheaper each individual trade costs. TradeStation is one such broker. However, if you order fewer than 10 trades per month, most tiered pricing models don't benefit you.
Services such as OptionsHouse and TradeKing with low set prices are a cheaper option for the casual and average stock trader. With both of these services, each trade is a fixed $4.95 fee. Other services we reviewed charge more than that, but none on our review charges over $10. These costs are for processing your own trades within the platform, but trades over the phone or with the assistance of a broker will likely require additional costs.
If you choose to trade options, you pay the base fee – generally the same cost as the stock trading fee – plus a per-contract fee. These fees range as little as $0.40 up to $1.50 per contract. If an options contract is fulfilled, there will be an additional fee for the contract exercise or assignment. optionsXpress is the only broker that does not charge those two fees.
Education & Training
Educational resources can help you learn not only about a specific platform but also about the market. Every person has his or her own way of learning: some prefer to read while others prefer videos or self-paced courses with assessments to determine comprehension. All services we reviewed offer some complementary and supplementary learning material.
The knowledgebase TradeKing offers is impressive. Its educational options are organized by the topic, by your skill level and by the market outlook. If you are a rookie, you can read material that speaks your beginner language without being inundated with jargon and market terms that are foreign to you. If you find yourself facing an overly volatile market outlook, you can look up strategies to help you maximize your gain.
If training courses are your preferred means of learning, E-Trade provides access to the Morning star Classroom. These courses walk you through a curriculum covering stock trading basics, building your portfolio and understanding the risks of investing in the stock market. Each course has a quiz at the end so you can test your knowledge.
Some online stock trading platforms offer simulated trading where you can test drive the market before you dive in with real money. optionsXpress, for example, offers its Virtual Trade, which gives you a free $25,000 virtual trading brokerage account, where you can practice trading stocks, options, futures and other investment vehicles. TD Ameritrade's thinkorswim platform offers a virtual trading platform as well: paperMoney. Similar to optionsXpress, paperMoney allows you to test drive the platform. The results are real, but the money is not so you will not lose or gain anything.
Our Verdict & Recommendation
When it comes to choosing a stock trading platform, "best" can be subjective. The best for you depends on your particular trading style, your strategies, your goals and your preferences. We have provided our top picks for best online stock brokers, and each has features and facets that make it a solid choice.
If your focus is strictly the bottom line and low fees are the deciding factor for you, OptionsHouse or TradeKing are a couple of your best choices. They both have low trade fees for basic stocks and for options. Their other fees and rates are competitive. They do have flat-rate fees, which benefit lower-volume traders. If you plan to order a high volume of trades, a tiered commission schedule from TradeStation may be better choices, though some of its other fees are comparatively higher.
For powerful platforms, you have the choice between online and desktop. OptionsHouse is a solid choice in online platforms. It is intuitive, customizable and offers powerful research and trading tools. If you're looking for a more powerful and versatile platform, thinkorswim is a good choice, though the learning curve may be steeper than with other platforms.
When reading through our reviews and considering which platform best suits your trading preferences, keep in mind that all platforms offer access to the stock market, so you can be in control of researching, monitoring, buying, selling and managing your portfolio. Have a look at our reviews and benefit from our research to find the best online stock trading service for you.