Picking the right online broker is essential for any trader. Signing up with the right trading platform is one of the most important decisions any trader makes. In our guide we will cover the basics of online trading and analyze the best online brokers in the financial industry. Trading platforms were evaluated based on: commissions, minimum deposits, costs of trading, research and education available, trading tools, customer support, safety and regulations and more. Ideally you want a brokerage that offers the best of both worlds – low costs and a comprehensive trading experience.
Also known as an electronic trading platform, an online trading platform is computer software that is used to place buy or sell orders for financial products online through a financial intermediary or online broker. There are many financial products that can be traded over the trading platform. These include currencies, commodities, derivatives, stocks, bonds and others. These trading platforms allow trading for users independent of their physical location. The term trading platform can also mean just the computer software used for trading. Electronic trading platforms these days are mobile-friendly and available on all the major operating systems. These days some trading platforms have charting tools, news feeds, research and other useful features built into them.
Things to consider when choosing a broker
When choosing an online broker here are some things to consider:
Type of investing – a broker that is great for active traders and strategies like day trading or swing trading might not be good for investors looking to hold long-term.
Costs – Every broker has different fees and commissions rates. If you are an active day trader, minimizing your cost per trade could mean more profits. Making multiple trades per day and cost can add up quickly. If you are just investing and holding for longer periods of time, costs per trade might not be as important.
Regulation – Making sure the online broker is regulated is good practice. Regulatory bodies from different jurisdictions across the world make sure brokers follow and respect the law. Broker regulation is essential and ensures you trade with a broker that acts in your best interests, offers some financial protection and does good business.
Available Assets and Markets – Whether you want to trade stocks, forex, commodities or cryptocurrencies, you want to make sure these are available on the trading platform.+
Customer Support – Look for good customer support with quick response times.
Trading Platforms – A good broker will offer a robust trading software. Does the platform offer all the order types and charting features? Many trading platforms are available as a web, desktop and mobile version.
Mobile trading app – Having the ability to open or close trades on the go is useful for modern traders.
Research Available – The best brokers offer their traders access to research tools to better understand the markets. Research tools vary from broker to broker.
Tools – Trading tools are essential for your trading success. Make sure the platform you will be trading with offers what you need.
Minimum Deposit – minimum deposits vary from broker to broker. Some offer minimum deposits as low as $10 or even $0. You want to find a broker that suits your individual needs.
Withdrawals – some online brokers have no withdrawal fees, while others charge a fee for withdrawals. This is important when day trading and withdrawing funds frequently.
What financial products can you trade?
Some of the most popular trading markets today are:
Forex – foreign exchange market is the largest in terms of trading volume. Forex trading is an OTC (over-the-counter) market for currencies. This is the market that determines the rates for currencies. Currencies are bought, sold and exchanged at current or determined prices.
Stocks – stock or capital stock of a company is all of the shares that divide the ownership of the company. Owning stocks could entitle the stockholder to a percentage of a company’s earnings, liquidation of assets or voting power proportional to the amount of money invested. Not all classes of stock are equal.
Cryptocurrency – cryptocurrency is a digital currency, typically not issued by a central authority. It serves as a digital medium of exchange where coin ownership is stored in a ledger database. It uses strong cryptography to secure transactions, ownership and creation of additional coins.
Binary options – binary options are exotic options also known as all-or-nothing options, digital options (for forex/interest rate markets) and fixed return options (FROs). The payout is a fixed amount or nothing. Two main types are asset-or-nothing or cash-or-nothing binary option. Binary options are considered high risk or unpredictable forms of investment.
Futures – futures are standardized legal agreements between two parties, to buy or sell an asset at a predetermined price at a specified time. The assets traded are usually commodities or financial instruments. The predetermined price is known as forward price.
Commodities – most commodities are raw materials, agricultural or mining products, basic resources.
Are online trading platforms safe?
Generally speaking, online trading platforms are safe. Various regulators from different jurisdictions oversee business practices of online brokers and minimize threats. Reputable brokers also have their own security measures. As a responsible online trader, you should have your own security precautions.
How do online brokers work?
Online brokers are an intermediary for transactions between a buyer and a seller of a financial instrument. For these services they charge a commission/fee. You can buy and sell financial instruments online without the need for a human broker. Online brokers are essentially a computer software that is used to place orders for financial instruments online.
Brokerage account types
There are various online brokerage account types available. Brokers offer different accounts ranging from retail to professional trading accounts, cash to margin, demo accounts and more.
Some offer different levels or tiers of accounts such as gold, silver, bronze or VIP.
Demo accounts or practice accounts are a perfect way to start for any trader. Most of the demo accounts offer the same functionality as real accounts, but without risking real money. Take advantage of this to get to know the platform and its features.
A margin trading account is a type of account where a credit line is given by the broker. Margin accounts have stricter rules and require a minimum investment. One thing to note is the fact that a margin call can be made by the broker. A margin call happens when a broker demands for the investor to deposit enough money into his account so the account is brought to the minimum value. This minimum value is known as the maintenance margin.
Managed accounts are trading accounts where the trading is done on your behalf. The most popular managed accounts are Forex managed accounts.
ECN Brokers Account
Most brokers are market makers, but an ECN account gives you direct access to the markets. This means tighter spreads. A good example is IC Markets.
DMA Brokers Account
Direct access accounts are similar to ECN accounts. DMA accounts use a specific liquidity provider while ECN accounts trades are placed anonymously through a network.
Different account tiers offer different fees, commissions, executions speeds and trading terms for traders. Usually account tiers are labeled as bronze, silver, gold, VIP or similar.
Online broker vs Direct access
Direct access brokers allow traders to directly route orders through ECN (electronic communication networks), exchanges and market makers. Typical online brokers or full-service brokers also focus on research and investment advice. They also execute orders through a predetermined liquidity provider.
Best for beginners
The best online broker for beginners is eToro. eToro offers a great and easy to use trading platform paired with their social trading capabilities. This makes it a great choice for beginner traders.
Best broker for penny stocks
The best brokers for penny stocks are:
Best trading apps
Most online brokers offer mobile trading apps. Many traders want to have the ability to monitor, open and close trades from anywhere in the world.
The best trading apps for 2020 are:
Plus500 App – best CFD trading platform
IQ Option Trading App – award winning trading app
eToro – best trading app for beginners
AvatradeGo – best forex trading app 2020
Degiro App – more than 50 exchanges available
Best stock trading apps
The best stock trading apps for 2020 are:
eToro – 0% commission on US stocks
Degiro App – access to over 50 stock exchanges
IQ Option – Best for Stock CFDs
Best day trading apps
The best day trading apps for 2020 are:
Plus500 – best day trading app overall
Avatrade – best for day trading forex
IQ option – best for day trading options
eToro – best for day trading stocks
Interactive Brokers – best for active day traders
Best binary options broker
Binary options is one of the most straightforward financial instruments to trade. It is based on a simple outcome – will the underlying asset be above or below a specific price at a certain time in the future.
The best trading platforms for binary options are:
IQ Option – award winning binary options trading platforms
Binary.com – comes in close second
Olymp Trade – variety of binary options available
ExpertOption – binary options available for forex, crypto, indices and stocks
BinaryCent – accepts bitcoin deposits
Best ETF trading platform
The best ETF trading platform is Interactive Brokers.
Best cryptocurrency trading platform
The best cryptocurrency trading platforms are:
eToro – low fees for cryptocurrencies
IQ Option – Award winning Crypto Trading Platform
Plus500 – Great for Cryptocurrency CFDs
Kraken – Wide Variety of Cryptocurrencies Available
Bitrex – Great selection of altcoins
Best discount online broker
Below there is a list of online brokers with the lowest fees.
The best discount online brokers for international traders are:
eToro – 0% commission on stocks & ETFs
Interactive Brokers – great for low cost active traders
Degiro – low cost stock trading broker
Best charting trading platform
Interactive brokers have the best charting capabilities. Real-time charts, parameters, trend lines, margin area, chart trader, multi-window are just a few that can be set-up.
Brokers without the pattern day trader (PDT) rule
The pattern day trader or PDT rule was established in 2001 by FINRA and SEC. The PDT rule requires day traders that want to trade more than three times per day in a five-day period, to keep a margin account balance of at least $25,000. Some traders tend to use off-shore brokers to get around this rule, but that can be very risky.
Here are ways to get around the pattern day trader rule:
Use a cash account instead of an margin account
Trading options or futures
How to learn to trade?
There are many great resources available online to learn trading. Education should be a top priority for any online trader, beginner to advanced.
Here are a few ways to learn online trading:
Open a demo account
Read trading books
Learn from online brokers educational portals
Watch youtube videos
Find a mentor
Place your trades through a trading simulator
Can you trade with less than 25k?
Yes, you can start trading with less than 25k. The rule of having a minimum account balance of $25,000 was established in 2001 by SEC and FINRA. The rule only applies to margin accounts for pattern day traders. Real money accounts can keep a much lower account minimum.
How do online brokerages make money
Online brokerage firms make their money in many ways. While some brokers charge $0 commission on stock and ETFs, trading other financial products incur a fee. This price war to the bottom led to some brokers offering low fees and cutting back on services like live support. Most brokers charge a spread or other types of fees like overnight funding fees, inactivity fees among others.
Online brokers by Country
Looking for the best brokers in specific countries? Take a look at the top rated online brokers for specific countries: