If you are looking for an online stock broker then you are probably overwhelmed with choice. With dozens of big name banks and financial institutions now offering a brokerage service, how do you now what to choose? The good news is that with so many good companies competing for your business, the service is tip top and very little separates the top 3 online brokers these days.
Online stock brokers essential fulfill the same service that traditional brokers in an office used to do 10 years ago. Back then, if you wanted to buy or sell stocks you had to pick up the phone and call your broker. He (or she) would then fulfill the order upon which a certificate would be issued to you as proof that you own that stock.
Although stock brokers still exist, the process has been streamlined to the extent that you can sit in your living room and buy or sell stocks at the push of a button. With an online stock broker, automated software can fulfill your order without almost instantaneously.
There are at lest a dozen excellent online stock brokers, but the big 3 are still eTrade.com, AmeriTrade and Scottrade. Although they aren't necessarily the cheapest, their service and what they offer makes up for their bigger fee. With that being said, even the fees are relatively small - at least it is compared to traditional broker. You can expect to pay anything between $4 and $20 per trade depending on your type of account and obviously the online broker you are using.
Almost every broker offer the same basic service and to really figure out which one is best for you, you need to dig a little deeper. Here are some of the things you need to look out for.
- Minimum account balance. How much do you need to start and how much do you need to maintain your account.
- Account level. Different account levels get charged differently. Usually bigger accounts get discount trades, so make sure that the advertised fee will apply to your account level.
- Margin and options trading. If you intend to use this, make sure your broker offer that and read their terms carefully - especially for margin accounts.
- Trading software. Some offer free trading software while others only offer it to those with a certain account level.
- If you are in a country outside of the USA, make sure that they will allow your country and if so, what paperwork is required. Usually you will need copies of your passport, birth certificate and tax forms to accompany your application.
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