For web-savvy "self-directed" investors, online stock trading is de rigueur. Online stock trading has redefined cheap; not to mention quick and easy. So cheap, in fact, that some major banks now offer free online stock trades. Fees elsewhere range from $2 to $25 per trade.
Discount online brokers that gained popularity with cheap no-frills service are now adding gizmos galore. You can test trading strategies without actually buying (TD Ameritrade); view investment videos (Schwab) or tap research (multiple brokers). All the online stock trading ingredients you need are readily available -- just add money.
Low fees, however, aren't the best way to pick an online broker. Trading tools, execution speed and research are crucial. To get what you need from online stock trading, consider these issues:
1) Will you place just a few buy/sell "trades" per month or year; a few dozen; or hundreds? At lower volumes, you might benefit from paying a bit more to get service and research recommendations.
2) It's ill advised to starting trading stocks online without first educating yourself on stock investing basics. You can buy or sell quickly with just a few mouse clicks -- and your money can evaporate just as fast.
3) Know your time horizon. Buy-and-hold investors are in it for the long term; 2-5 years or more. Mid-horizon investors may only hold stocks for 6-12 months; and "day traders" move in and out of market positions in a single day. The latter is strictly a game for pros who know what they're doing (and they lose money too).
4) Recognize the down-side of online trading. If your web connection tanks, you're stuck. You could have problems accessing your account or making trades, especially during high-volume periods. Plus, you're on your own and may have no lifeline to professional advice for when or how to exit the market. And while full-bore brokers can sometimes offer access to IPOs or other opportunities, online discounters can't.
Action Steps
The best contacts and resources to help you get it done
Compare online stock trading and brokerage providers
Online stock trading is so competitive there's a perpetual price war to attract your business. But these days, with prices at rock bottom, the real battle is over additional services the discounters can offer.
I recommend: Investing Online Resources Center (IORC), an independent, non-commercial investor education organization, has links to independent rankings, service comparisons and features of online brokerage firms from places such as
Smart Money magazine and
JD Power. Take IORC's
quiz to find out if online investing is right for you. Or see their
tutorial on signing up for an online account.
Pick an online brokerage account partner
Check prices, features and available research at several different online stock trading firms.
I recommend: If keeping your finances in one place is important to you, try online stock trading via your bank. Not all banks offer online brokerage account services. A few that do include majors like
Citibank,
Wells Fargo,
Bank of America,
Chase,
Wachovia and others. Discount or "premium discount" brokers, including
Charles Schwab,
Ameritrade,
Scottrade,
TradeKing, FirstTrade and
eTrade can all provide the online trading accounts and tools you need to buy and sell stocks with low commissions. Full service firms for online stock trading include big names like
Merrill Lynch,
Edward Jones,
Morgan Stanley and
A.G. Edwards.
Arm yourself with information
The more knowledge you acquire about online stock trading, the better your chances of success.
I recommend: Market information sites such as
CNBC,
MarketWatch and
Yahoo! Finance have a broad range of helpful information and tools helpful for online stock trading.
Morningstar is an "A-List" provider of independent research for individual investors (as well as financial advisors and institutions), including a variety of stock and mutual fund publications, websites and software. Brokerage firm customers get access to stock research and tools that vary greatly by firm. Leading discount broker
Charles Schwab, for example, functions more like a full-service firm by providing stock research and trading recommendations. Their "
Active Trader" service offers a series of advanced stock trading tools, including software, data, proprietary research and specialized support.
TechniTrader and
Investools are among the independent firms offering stock trading education, tools and strategies.
Value Line is also an excellent source of stock trading information, as is
Better Investing.
See our other stock investing How-To Guides
How-To Guides on Work.com and Business.com can help you locate all the tools and resources you need to be successful at investing in stocks.
I recommend: Other top-rated How-To Guides on successful stock market investing include:
Stock Trading: Success in both bull and bear markets;
Stock Quotes: Free online stock quote services abound. And add-ons can dazzle; and
Stocks (Equities) and Stock Investing.
The official source of Online Stock Trading is the Online Stock Trading page at Business.com
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