If you have plenty of money full-service brokers such as Goldman Sachs will charge in the region of $150 per trade, and provide a whole range of services, the problem is their compensation depends on how often you trade, so unscrupulous brokers can encourage you to trade more often than you need to. They will also require you to have a lot of money to start with.
Discount Brokers on the other hand are cheap and cheerful, they take your order (usually online) and execute it more or less instantaneously. If you have never bought stocks or shares online before they make it very easy for you to get started and their systems are generally straightforward. They will charge a commission per order which is generally either low or very low i.e. between $2 and $15. So you log on type in the name or ticker symbol of the stocks you want to buy online and after you see the quote click on buy if you like what you see or cancel if you don't like what you see. And that's all there is to it. You buy your stocks online, hold on to them until the price rises and then sell them and you have made a profit online stock trading ! Easy peasy. Unfortunately you will find that buying and selling stocks online is easy, actually making money from online stock trading is a bit more complicated !
Commissions are low because discount online brokers offer no advice, although they do give you lots of information such as real-time quotes, charts, news etc...
There are plenty of online brokers that will show you how to buy stocks online, so which should you choose? Here is a list of some of the best online brokers.
- TradeKing charges $4.95 per trade regardless of your account balance. They have won a whole load of awards - and have the top rank of 4 stars **** in Barron’s Survey for "Best Browser-Based Online Brokers".
- Zecco - you get 10 free trades each month if you have $25,000 in your account or if you make 25 trades month, otherwise trades are $4.50 per transaction + 50c a contract.
- E*Trade charges between $7.99 and $12.99 per trade depending on the number of trades per quarter, there are also inactivity fees of $40 per quarter. They do however offer some advice. They were chosen as number 1 online broker Smart Money for 2007 and 2008.
- Firstrade costs $6.95 a stock trade and they get less fines from regulators for customer complaints !
- OptionsHouse is just $2.95 a stock trade. They also have a system that lets you practice virtual trading and a range of Webinars.
- tradeMONSTER is a newer online broker, they launched in 2008, but they have already won several awards. Price is $7.50 a trade. Their user interface allows you to customize it to your specific tastes. They have no additional charges or trading minimums, and offer streaming information so you don't need to continually refresh the page to get real-time prices.
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