Which Online Stock Brokerage Is For You?

Of all the online stock brokerages that have an online presence, which one should you go for? They all differ in various ways, and you want to find one that satisfies your own individual requirements.

Whatever your situation – newcomer or experienced trader, you’re probably looking for an “execution only” broker service. This means you make your own decisions as to what stock to buy or sell, and when, and just use the broker’s facilities to do so. The internet makes this very easy.

Fees will be a main concern to most. How these are calculated varies. For example, one broker may have low fees per transaction but charge a high annual management fee, while another may have higher transaction fees but with no annual fee. If you plan to do a lot of trading the former structure would suit you better but if your trades are few in number then you’ll have to “do the math” and work out which is going to be cheaper.

And what if you want to switch your account to another online broker? Is there an exit charge? If you want to deal in shares in an overseas company, or speculate on a foreign index, are there hidden charges? Don’t be afraid to telephone or email the broker to clarify these matters.

Some brokers with low fees only provide a basic level of information, whereas others with a higher fee structure provide much more, such as charts, graphs, price history, news, analysis, and so on. If you’re really serious about succeeding in online financial trading then you’ll need most of these facilities.

You’ll probably have to decide whether you need live prices, for which you’ll have to pay a high fee, or whether you can manage with time-delayed prices such as 15 minutes or even the previous day’s closing prices. This depends on the kind of trading you’ll be doing.

If you plan to do day-trading, where you hold positions only for a day or two at most, and sometimes for only a few hours, then you need live prices. But if you’re a longer term trader, holding positions for days, weeks or months, then the previous day’s closing prices are all you’ll need in order to trade successfully.

Also bear in mind that much of the information that you may be offered at a high price can be found freely on the internet if you just search for it. In addition, there is software available, such as Sharescope, that can provide all the information you need independently of your stock broker. This may be cheaper or better value for money than the tools your broker offers.

Taxation is something easily overlooked when considering which broker to choose. If you want to take advantage of any tax reliefs, such as putting investments into an IRA (Individual Retirement Account) if you live in the USA or into an ISA (Individual Savings Account) or SIPP (Self Invested Personal Pension) if you live in the UK then it’s important that your broker is familiar with these accounts and allows you to easily make the  arrangements, liasing if necessary with your accountant or tax lawyer.

Ease of use of the broker’s web site is the remaining important thing to consider. Look for one-click access to the main areas of the site that you are likely to visit regularly. Is the layout simple and logical? Not too much clutter? Links where you’d expect them? Can you see yourself using the site perhaps every trading day for the next few years? Good. You’ve found the online stock brokerage that’s probably just right for you.

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Philip Gegan