A Quick Review of Stock Brokers
I received a request from Samuel Keteku about which brokers are used by various Real Life Traders and what are the basic pros and cons of each. Ask and you shall receive!!! And thanks, Samuel, for being a Real Life Trader.
The list below is not intended to include every broker available or every broker used by Real Life Traders. I will briefly discuss some that I have used and some opinions from other Real Life Traders. You must study each broker and decide for yourself which one best meets your need. Be sure to verify the broker is licensed to operate in your area.
A quick note before we begin about two common challenges among day traders. 1) In many countries, there is a law requiring a minimum amount of cash in the account in order to day trade without restriction; in the USA, you must have $25,000 in the brokerage account or you are limited to 3 day trades in a 5 day period. 2) The second challenge is buying power; sometimes if you are taking a small risk on a high priced stock, you may not be able to enter the trade for as many shares as you want. In the USA, you are allowed a maximum of 4:1 leverage with a margin account.
Pros: The brokerage platform can do just about anything and everything including shares, options, spreads and more. Commissions and fees are some of the lowest available and little is $1 per trade. I have found customer service to be competent and friendly most of the time.
Cons: The brokerage platform can do just about anything and everything which can make it overwhelming to learn. It is sometimes difficult to short shares of certain stocks, but I have noticed this problem less and less recently. Charting (at least as far as I have learned) is not that great, so I still use TradingView for charting.
Pros: Flexible platform and not too difficult to learn. Good customer service and inexpensive trades.
Cons: OptionsHouse went through a merger with Trade Monster. During the merger, some functionality was removed and customer service dropped, which is when I moved to Interactive Brokers.
Pros: Simple and easy to use; a nice interface; easy to use options calculator
Cons: High fees, bad charts, some stocks hard to short
Pros: They have many locations in the USA and beyond providing a store where traders can walk in and do business face to face. One price per trade no matter how many shares can be great for large trades
Cons: Fees are high for small positions and the platform is limited for some types of transactions
Etrade and Scottrade
Pros: They have stores where you can walk in and do business face to face. Many of them hold classes where they will teach you in person how to use their platform
Cons: Some of the highest commissions around and can be somewhat limited in types of trades allowed.
Pros: Free commissions and fees
Cons: Can not short shares
Think or Swim
Pros: Easily able to trade from the charts and quickly place advanced orders.
Cons: Commissions can be a bit high and the PnL isn't easily understandable, unless you look at your positions through TD Ameritrade, which is owns TOS. And TD Ameritrade is also it's own broker as well, which can get semi-complicated at times.