DIY Investing – hands across the ocean: What is online stock trading?
Unlike in the past, where you needed to contact a physical stockbroker’s office in order to execute a trade, stocks can now be traded online through online brokers. When you participate in trading a stock online, you are either buying or selling assets through an online brokerage firm.
There are many benefits to the new means of stock trading and a few negatives, such as the inability to talk to a physical broker about making purchase decisions. Despite what negatives may have arisen as a result of the rise in online stock trading, many online brokers have aimed to address the issues and offer services to alleviate those issues.
Why Would Anyone Want to Trade Online?
Online stock trading has made the stock purchasing and selling process much more quick and efficient. Most online trading platforms offer numerous tools to help investors make informed decisions.
Trading has never been simpler and cheaper. Trades that used to be executed over the phone carried higher commissions than trades that are executed online now. Additionally, the use of paper documents has practically been eliminated due to the advent of computers and their massive storage spaces.
What are Some Online Stock Trading Platforms?
Picking the proper platform, to trade stocks on online, depends on the types of stocks that you prefer to trade and your needs from a platform. There are a variety of services that each broker offers, so it is crucial to read the available documents to get a better understanding of what you will or will not receive.
A few things that we recommend that you pay special attention to, when choosing an online broker are commissions, fees, services offered, required minimum account balances, and reviews from customers of that broker.
TDAmeritrade offers two separate platforms for two different types of investors. Their first platform, Trade Architect, is targeted towards beginner traders and traders who do not trade very often. ThinkorSwim, their second platform, is designed for advanced traders who trade high volumes on a consistent basis. Both platforms are free for TDAmeritrade customers to use, and customers can choose to use one platform over the other at their own will. TDAmeritrade charges a $6.95 commission on all trades across their platforms.
Fidelity offers a vast amount of research tools to their traders. The tools on Fidelity are provided by over 20 providers. Although a few tools are reserved for high-volume traders, Fidelity now offers commissions at $4.95; a fee that aims to attract new investors.
Much like TDAmeritrade, Charles Schwab utilizes two separate trading platforms for two different types of traders. Charles Schwab charges a competitive $4.95 commission fee and offers a variety of exchange traded funds that are commission-free. The customer service of Charles Schwab is great as well. Beware however, as Charles Schwab does have a required minimum account balance of $1000.
Founded in 2010, Merrill Edge is a subsidiary of Bank of America but is available to non-Bank of America customers. The trade commissions at Merrill Edge are $6.95 per trade and $7.70 per option contract. The rewards program at Merrill Edge is unrivaled as they offer a variety of rewards from free trades to cash back. Merrill Edge charges a 0.45% annual fee based on the investments in a trader’s account, so do be aware of that.
Ally offers one of the lowest costing trading platforms. Ally charges a $4.95 flat rate commission on all trades. Additionally, investors that meet certain trading requirements will see their commission drop to a $3.95 flat fee. With a promise of no hidden fees, Ally has a $0 account minimum balance and also offers an online trader network service.
Online stock trading has made the trading process much more simple, efficient, and quick. A trade that used to take multiple steps to execute can now be completed within a matter of seconds, all from the confinement of your own home.
There are many opportunities now for novice investors to learn and improve. Despite the various tools offered by each platform, there is no guarantee that you will make more money on one platform versus another so it is important to pick the trading platform that you believe suits your needs the best.
For a more in-depth explanation as to how online stock trading works, consider reading this article on HowStuffWorks and this article on Investopedia. And if you’re considering which platform to use for yourself, give this article a shot here.