Choosing a Discount Brokerage
Selecting a discount brokerage wouldn’t be difficult if there weren’t so many good choices. It is not difficult to make a good choice, but let’s see if we can help you make the best possible choice.
Cost of an Online Trade
If you are going to make more than a few trades, the costs of your trades can add up quickly. If you are trading smaller volumes of shares, the cost of each trade can cut into your margins and make trading less profitable. In most cases, the cost of an online trade is the most important criteria in selecting a new broker.
Let’s look at the cost of an online trade at the leading discount brokerages:
| Cost | Brokerage |
|---|---|
| $4.75 | OptionsHouse |
| $4.95 | MB Trading |
| $4.95 | TradeKing |
| $6.95 | ShareBuilder |
| $6.95 | Merrill Edge |
| $7.00 | Scottrade |
| $7.95 | Fidelity |
| $8.95 | Charles Schwab |
| $9.99 | E*TRADE |
| $9.99 | TD Ameritrade |
| $9.99 | thinkorswim |
Cost of an Offline Trade
Most discount brokerages offer automated trades at slightly higher rates via touch-tone telephone systems. The low-cost leader above, OptionsHouse, charges the same $4.75 for trades made through their automated touch-tone telephone system.
Minimum Opening Balances
OptionsHouse requires a $1,000 minimum opening balance. If you cannot currently meet this requirement, you can still get $4.95 trades at TradeKing and MB Trading or $6.95 trades at ShareBuilder and MerrillEdge.
Editors Note: OptionsHouse is currently waiving the $1,000 minimum opening balance requirement.
Minimum Opening Balances for Margin Accounts
OptionsHouse requires a $2,000 minimum balance to trade on the margin. If you cannot currently meet this requirement and still want to practice margin trading, Charles Schwab will let you open a margin trading account with a $1,000 minimum balance.
Trading on Foreign Stock Exchanges
OptionHouse, TradeKing, ShareBuilder, MerrillEdge, and Scottrade do not provide the capability to trade on foreign exchanges. MB Trading allows trades on foreign exchanges for $4.95 + $0.01 per share. Fidelity offers trades on foreign stock exchanges with flat fees defined for each exchange.
Special Deals
Many brokerages offer special deals for desirable investors. Merrill Edge, for example, offers 30 free trades per month to investors who maintain $25,000 balances.
Feedback
We would love to hear from you. What is your preferred discount brokerage and why?
I’ve been using Scottrade for many years. I have two offices near me so I am able to take part in trainings/seminars that they have. I also love that their commissions haven’t changed over a long period. Many of the others on this list have changed their commissions over the past couple years. I remember when optionhouse use to be under $4. I love knowing that, more than likely, it will continue to only cost me $7 for a trade.