Choosing a stock broker is an important step when you’re just starting out with trading and investing. Your broker will be more than just a portal into the market – it will be your partner and your main source for trading tools and information. Choosing a high-quality stock broker can help you start out with trading on the right foot and pave the way for success.
With so many stock brokers competing for attention, it can be especially hard for first-time traders to decide which one is best. In this guide, we’ll offer some tips on how to choose your first broker and highlight three of the top options.
What Is A Stock Broker?
A stock broker is an individual or firm that acts as a middleman between you and the market. When you place an order to buy a stock, for example, your broker will go out and find that stock for you at the best possible price. Your broker will also hold your shares digitally in your account so that you don’t have to worry about taking possession of physical stock certificates.
Having a stock broker isn’t just convenient – it’s also essential for trading. Individual traders aren’t allowed to buy and sell shares on major exchanges, so going through a broker is the easiest way to interact with the market.
How To Choose A Stock Broker
There’s a lot to consider when choosing a stock broker. Brokers are competing on a wide variety of fronts, such as what fees they’re charging, what markets they give you access to, and the ease of use and feature sets of their trading platforms.
Let’s take a look at some of the most important factors to consider when picking a stock broker.
By definition, a stock broker allows you to trade stocks. But what stocks can you trade exactly? Most US brokers offer trading on all US stocks, regardless of whether they trade on the New York Stock Exchange, the NASDAQ, or an over-the-counter market. If you want to buy and sell shares of international companies, be sure to check whether your broker offers trading in foreign markets.
Many stock brokers also offer stock-related assets, like ETFs, mutual funds, or stock options. If you’re interested in trading these types of assets, it’s worth checking whether your broker offers a wide range or just a limited selection.
A number of brokers also offer trading on non-stock assets, like bonds, forex (currencies), cryptocurrencies, and commodities. The availability of assets to trade in these classes varies widely between brokers, so make sure to check what a prospective broker can offer.
Your trading style also plays an important role in determining which brokerage is best for you. Some brokers are geared towards day traders, with advanced trading platforms and strategy development tools. Other brokers focus more on long-term investors by providing portfolio management resources and financial advice.
Think carefully about what your goals are, and then look for a brokerage that can help you achieve them.
Fees And Commissions
Until relatively recently, almost every major US stock broker charged commissions for every trade. Many also charged monthly or annual account fees on top of that.
Now, many brokers have waived or dramatically reduced their commissions and fees. Take a close look at your broker’s pricing schedule to see what you’ll be charged for, and think about whether those charges will add up. Free ETF and mutual fund trades might be critical for long-term investing, for example, while free stock trades might be more important if you plan on day trading.
Trading Platform And Research
Stock brokers vary widely in the quality and depth of their trading platforms. Some brokers offer a simple interface that’s easy to understand and navigate, but that doesn’t offer the in-depth charting tools you need to grow as a trader. Others provide highly advanced charting software that can be daunting to navigate even for experienced traders.
Depending on your goals, it’s best to look for a broker with a trading platform that falls somewhere in the middle. Ease of use is important, but you still want access to features that can help you make informed trading decisions. In particular, consider the quality of the charting software, whether your broker provides key technical and fundamental data about stocks, and whether you can get access to market news and analyst research.
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Best Stock Brokers For Beginners
With all those considerations in mind, let’s take a look at three of the top stock brokers for beginner traders.
Best For Simplicity – Robinhood
Robinhood is a brokerage built specifically for first-time traders and investors. It offers an incredibly simple interface that’s optimized for mobile, and all trades are commission-free. One of the best things about Robinhood is that the brokerage automatically suggests stocks similar to those you’re already trading, which makes it easy to discover new companies that might be worth additional research.
The downside to Robinhood is that it can be too simple in some respects. For example, the broker offers only the most basic price charts with no tools for technical analysis. In addition, it can be difficult to create a diversified portfolio when the platform is suggesting stocks in industries you’re already exposed to.
Robinhood offers the ability to stocks, options, and a handful of popular cryptocurrencies.
Best Combination Of Simplicity And Features – Webull
Webull is a lot like Robinhood – it’s a commission-free stock and options brokerage that’s optimized for mobile trading. Trading with Webull is still extremely simple, but this broker gives you access to a number of more advanced features. For example, you can analyze stocks with dozens of popular technical indicators using the built-in charting software. Webull also offers Level 2 exchange data, which gives more insight into the buying and selling action that’s driving price changes.
Webull still doesn’t offer any portfolio management tools, and it lacks the discover feature that makes Robinhood so friendly for beginners. However, it does offer IRA accounts, which makes it a good choice for retirement investing as well as trading.
Best For Features And Resources – E*TRADE
If you’re looking for a versatile brokerage that can grow with you, we recommend E*TRADE. This brokerage offers commission-free stock, ETF, and options trading, plus trading on a wide variety of mutual funds, futures, and bonds. Another benefit to E*TRADE is that there are multiple account types, including standard brokerage accounts for trading, retirement accounts for long-term investing, and premade and managed portfolios for investors who want to take a hands-off approach to trading.
E*TRADE offers two different trading platforms – the standard E*TRADE platform and Power E*TRADE. Both are available on web and mobile, and the Power E*TRADE platform is ideal if you want to dive into technical analysis for active trading. It offers more than 100 technical studies and 30 drawing tools, plus automated risk management tools for evaluating options trading strategies.
Best of all, there are real humans behind E*TRADE. If you need help using this broker’s tools, you can call in anytime for live customer service.
Conclusion: Choosing Your Stock Broker
Choosing the best stock broker for your needs can play a huge role in your success as a trader. Be sure to carefully compare your options and think about what your trading goals are. Once you have an idea of the features you need and the assets you want to trade, Robinhood, Webull, and E*TRADE are all excellent brokers to start trading with.