This video breaks six types of brokerage firms, bit by bit, piece by piece, so you will no longer be confused!
When hiring a broker, there are many important things that you should consider and look out for. Here are just a few examples.
1. Is there a minimum balance for starting an account with the broker?
Some brokerages require clients to open an account with a minimum amount of money. This might be anywhere from $500-$1,000. It is important that you understand any of these conditions before doing business with a broker.
2. How difficult will it be to withdraw your money?
Before handing your money over to a broker, you should be aware of how easy or difficult it will be to withdraw your funds. Some brokers require a fee for withdrawing money or won’t let you take out any money that will cause your balance to drop below the account minimum.
3. How much experience does the broker have?
Another important question to consider when hiring a broker is how experienced he or she is. While the number of years the broker has under the belt is important, it is also important to know what kind of experience he or she has. Has the broker primarily worked with clients who have the goals as you or would he or she take you down a road you might not be comfortable with?
4. What is the broker’s track record?
If you know of anyone who has used the broker, inquire to them about his or her track record. Ask the reference about the broker’s overall philosophy as well as about his or her appetite for risk (or lack thereof.) Also be sure to check with regulatory agencies to be sure that the broker has operated in a legal and ethical fashion and has not been fined or reprimanded by any of the regulatory agencies.
5. What designations does the broker hold?
There are many designations a broker could obtain. It is important to be familiar with what designation a broker has, as well as what the designation means. Some of the more common designations include: Certified Financial Planner (CFP)-CFPs must complete at least 18-24 months study, pass an examination and work three years as a financial advisor or complete a two year apprenticeship with another CFP. Chartered Financial Analyst (CFA)-To become a CFA, brokers must pass three six-hour exams and have four years of experience.
6. What is the broker’s fee structure?
When selecting a broker, it is important that you understand how, and how much, he or she will be paid. Will the broker work by the hour or receive a commission? A combination of the two? Something much more complicated? Ask all of the right questions and make sure you understand how the fees work before deciding to work with a broker.
7. Is the brokerage considered “full-service” or “discount”?
The distinction between a full service brokerage and a discount brokerage is important. A full service brokerage offers many more services, such as research and one-on-one advice, than discount brokerages do. Naturally, you can expect to pay more for the assistance of a full service broker. A discount brokerage offers much less in terms of service, but is also much less expensive.
Many investors and active traders are still not aware of the highly rated deep discount brokerages in the U.S. that come with a very cheap cost of buying or selling stocks and/or ETFs in a flat rate pricing and as low as 1$ for every trade in a pay-per-share pricing plan. Since the introduction of stock trading at only $30 per trade by Charles Schwab, stock trading commissions have dropped down a lot. Competition among various brokerage firms is currently very strong with new brokerage firms coming out almost every year pressuring firms that have already established themselves in the brokerage business with very aggressive pricing.
Deep discount brokers will also offer a pay-per-share commission structure and with it, traders will pay for every trade share. The more shares a trader buys with the pay-per-share structure the higher the cost will be. All deep discount brokers usually have a minimum charge per trade of at least $1.00. Below are some of the top 5 deep discount brokerages in the U.S. today.
1. Trade Station
Trade Station is a discount brokerage firm commonly known for the lowest rates it offers to its traders. The firm only charges $0.01 per share for the first 500 shares and $0.006 per share after that with $1.00 minimum per trade. Options pricing in Trade Station can go as low as $4.99 with an extra $0.20 per contract for each active trader. Mutual funds in Trade Station have been priced at $14.95 per transaction.
However, one of the main downfalls of using this broker is that if you have not traded at least 5,000 shares within the previous trading month, a $99.95 fee will be charged for using Trade Station’s trading platform. But the fee does not apply for accounts with a balance of $100,000 or more. Barron’s magazine has rated Trade Station as ‘The Best Broker for Worldwide Traders’ and ‘Best Broker for Frequent Traders’.
2. Options House
Options House is one of the top discount brokerage companies available today which charges a flat rate of $4.95 for ETF trades or stocks regardless of the number of shares in a specific order. There is also an additional surcharge of $0.005 for stocks that are not options eligible and priced at $2 or less. Options House also offers options trading with $4.95 plus an additional $0.50 for every contract rate. The mutual funds are priced a bit higher than Trade Station at $20 per transaction.
Options House is one of the best choices for day traders and active traders looking for a flat rate commission account that will allow them to make larger and cheaper trades which are normally expensive with the pay-per-share pricing plan. This discount brokerage company also offers to its traders virtual trading, a free checking account, and real-time quotes. There are also no extra fees for IRA accounts and for inactivity.
3. Interactive Brokers
Interactive Brokers is a discount brokerage company that offers to its traders a pay-per-share commission structure. Traders at Interactive Brokers normally pay $0.005 for each share that has a $1.00 minimum for every SMART routed order. This generally means that orders of up to 200 shares will cost traders $2.50 per trade while orders of 1,000 shares will cost $5.00 per trade, and orders 2,000+ shares will cost $10.00 per trade.
Options trades at Interactive Brokers are typically priced at $0.70 or less for every contract including exchange fees while mutual funds cost $14.95 for each transaction. There are also additional costs that can be incurred when trading with Interactive Brokers such as a $10 monthly fee if an account is inactive which can also go up to $20 if the balance of the account is less than $2000, and if a trader’s trading commissions are less than $10, then he or she will incur a $10 monthly fee for market data. This means that investors who don’t trade often could end up paying up to $360 every for being inactive.
4. Options Xpress
Options Xpress is another great discount brokerage company with a name that suggests that it mainly deals with options. However, besides options, traders have the option of trading in almost anything such as future contacts and stocks. Stock trades at Options Xpress cost $9.95 which is slightly more than what some discount brokerage companies have to offer and trade options have a $12.95 flat fee for up to 10 contracts. Margin rates are normally from 6.00% to 8.25% and the mutual funds are priced at $9.95 including loading fees.
Options Xpress also has no additional costs for broker-assisted transactions making it a very good choice for traders who require help with their trades. This discount brokerage company is also well known for its trading tools which fall into three categories that are designed to help traders locate good investment opportunities, analyze those opportunities, and execute trades.
5. Scott Trade
Scott Trade is a highly ranked and privately owned discount brokerage company that operates both at retail locations and online. It offers a very reasonable cost compared to other deep brokerage firms with stock trades and trading options only costing $7 plus $1.25 per contract, and broker assisted trades $27. The firm also ranks well in most broker surveys including SMART money’s 2009 survey. It also features various types of accounts including IRAs and other retirement accounts. In the IRA account, there is no annual, custodian, opening, or closing fees.
Margin rates range from 5.25% to 7.25% while mutual funds are priced at $17 per trade. The account opening minimum is $2,500 and there are no maintenance or inactivity fees incurred when using this deep brokerage firm. Scott Trade has the largest network of branch offices among the various discount brokerage companies available today allowing most traders in the US to be able to talk to their staff face to face more easily if they need to.
One of the most dynamic and interesting sectors of industry today is the stock market, where you can buy and sell stocks. You can choose to perform the trading yourself or hire a trade broker. This is an individual who handles your orders to buy or sell securities, them being the middleman between you and the stock market.
The term ‘broker’ can be used to mean an individual trader or a company which performs such trades on behalf of their clients. Examples of these companies are Merrill Lynch and Morgan Stanley. It is an alluring career option to choose from today. Do you want to be a successful trade broker? Here are 10 tips on how to accomplish this:
1. Develop A Winning Character
This is the core activity which you should perform if you want to be a successful trade broker. First, you need to be driven and develop the character of a self-starter. Find a way to become intrinsically motivated to perform trades successfully, and learn how to deal with rejection when it happens. Trade brokers work for very long hours and some will even work on the weekends. You must train yourself to have this kind of stamina. Good communication skills are paramount if you want to be a successful trade broker. Moreover, have good time management skills, know how to close a sale and develop the strength to persevere hard times in the market.
2. Get The Right Education
To become a successful trade broker, a bachelor’s degree is required. The most ideal fields of study are business, economics, accounting or finance. A master’s degree is simply a bonus but it is advisable to get one since employers actually prefer candidates who have an MBA (Master in Business Administration). Possessing this level of education allows you to qualify for bonuses, a higher salary and quicker advancement through the corporate ranks. If you desire to manage some client acounts, you have to be a registered trade broker representing your employer. This registation is performed at the Financial Industry Regulatory Authority (FINRA). To register successfully, you need to pass the General Securities Registered Representative Examination.
3. Identify Which Type Of Broker You Want To Be, Then Pursue That Direction
If you are taking up this career in pursuit of prestige, then you can go to work for full-service broker firms. Examples of these are Morgan Stanley and Merrill Lynch. These firms normally have a broker payout of 41%. However, you have to earn a minimum of $650,000 for the firm to get this payout. If you desire a more independent approach to your trading activities, you can work for an independent broker firm such as LPL Financial. In this type of firm, you get a higher payout of 89% to 95% but you have to set up your own office. Last but not least, if you want to work in a low stress and friendly environment, then a discount broker is ideal. An example of such a firm is Charles Schwab Corp (SCHW), where you will earn a flat salary. However, you will gain experience by learning and practicing in a wide variety of investment areas.
4. Understand The Best Times Of The Day To Trade
The most ideal time to trade is in the afternoon. This is from 1:00pm to 2:30pm. During this time, most people are at work and have had a chance of understanding and comprehending the important business news of the day. Moreover, corporate reports and government data is released in the morning. As such, you can use these sources of information to make your trades in the afternoon.
5. Strive To Buy Stocks That Cost More Than $10 Per Share
When you are making stock purchases, strive to buy the ones which cost more than $10 per share. Firstly, those which cost less than this have a higher percentage spread between ask and bid prices. This makes it harder to break even. Secondly, companies whose stock costs less than $10 are much more likely to suffer financial problems, for example bankruptcy.
6. The Best Points Of Entering The Market Are Where The Supply And Demand Are Imbalanced
Just like any other sector of business, if the supply is low, there is high demand. In the stock market, this sends the price of the stocks soaring. Find the best point of entry by studying the historical stock patterns. Once you do this, enter at the optimal point where the price is low enough due to excess supply and yet the stock is about to generate demand and rise in price.
7. Research The Ask And Bid Size Before You Make An Order For Buying Or Selling
As a stock trader, you need to invest in a good system for real-time quotes. Ensure that your system tells you the last price of a stock, its ask price and its bid price too. If the bid price is higher than the sell size, that stock has high demand in the market. It is good to sell it as soon as you can.
8. Set Stock Price Targets And Profit Goals Before You Enter A Long Term Position
In the stock market, there are two general approaches of trading; taking short positions or long ones. If you decide to go long, identify how much profit is acceptable to you and create a stop-loss in case the stock begins to dip. After doing this, stick to your initial decisions and don’t sell even if the price rises to tempting levels. If the stock market is performing well, then you can change your stop-loss level and profit target. Otherwise, stick to your original goals.
9. Focus On A Risk-Reward Ratio Of 3:1 As You Set Trading Targets
One of the most important activities to perform as a stock trader is to set a proper risk-reward ratio. This ratio assists you to lose small amounts and win big ones. By sticking to a risk-reward ratio of 3:1, you can always emerge a winner even if you have lots of small losses on your trades. Over time, you can become much better at trading and begin posting ratios of up to 5:1.
10. Understand The Best Time Of The Month To Buy Stocks
The most ideal time of the month to buy stocks is between the 18th and the 22nd. This period of the month is when stock prices are low due to a low ebb in cash flow from dividend reinvestment and pension funds. On the other hand, the best time to sell your stocks is the first and last two days of the month. Moreover, September and October are ideal months to buy stocks and May is the best time to sell.
Becoming a stock trader is an exciting job option. In the dramatic world of finance, your fortunes can change at any time and turn you into a master stock trader. You can find yourself amassing a portfolio worth billions. The tips above can get you on the right path to stock market success.
Are you finally read to choose an online broker? Before you do, check out the following video, but not before you read our article regarding Top 5 Deep Discount Brokerages in the US.
In the aforementioned article, we get into the nitty gritty of things: “Deep discount brokers will also offer a pay-per-share commission structure and with it, traders will pay for every trade share. The more shares a trader buys with the pay-per-share structure the higher the cost will be. All deep discount brokers usually have a minimum charge per trade of at least $1.00. Below are some of the top 5 deep discount brokerages in the U.S. today.”
Please do have a read!
Anyway, before you hire an online broker, watch this video.
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