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Trade costs are no doubt on many investors’ minds. Just like paying $4 for a Starbucks latte every morning adds up, so does paying $7, $8, $9, or $10 per trade. For coffee drinkers who must have their morning brew, cost can be reduced dramatically at the expense of quality and taste. This exact philosophy holds true for online trading with a discount broker, which we will now explore.
StockBrokers.com's Top Picks for Discount Trading
Best Brokers for Discount Trading
Here are the best discount stock brokers for 2019:
- Fidelity - Best all-around investing experience
- Interactive Brokers - Best pricing for active traders
- Merrill Edge - Best rewards program, earn free trades
- Firstrade - Free trades, balanced offering
- TradeStation - Flexible options commissions, great tools
- Robinhood - Free trades, no tools or research
Online Brokerage Fees Comparison
Taken from our online brokerage comparison tool, here's a comparison of the trading fees and margin rates for the most popular discount brokers.
How to Compare Broker Fees
Trading cheaply is reasonably straightforward; however, investors should be careful when deciding on a final broker. The regular prices paid for stock and options trades are not the only cost factor that matters. A variety of other important factors can affect the net cost per trade when trading stocks and options online. Here's a list of the most important ones:
Are there tiered commission rates? Most brokers offer flat-fee stock trading. Some brokers though, especially active trading-focused brokers, offer per-share trading. Both have their pros and cons; it depends on the order size you trade, on average. For example, placing 2,000 share orders, on average, would make a per-share broker expensive, compared to a flat-fee broker. The vast majority of investors, over 99%, trade with a flat-fee broker.
What is the broker's order execution quality? For discount trading, nothing helps more than having your broker consistently achieve fill prices better than the National Best Bid and Offer (NBBO). Whether the broker clears itself or with a third-party, as well as the broker's policy on payment order flow are two simple examples of factors that impact execution quality. For a full breakdown, see our Guide to Order Execution.
What options are available for order routing? Important to day traders, some sophisticated brokers offer direct market routing, giving customers full control of routing costs through market center rebates and fees.
Are there extra charges for market data access or platform access? Some brokers will charge extra for access to market data such as level II quotes and international exchanges. This is very common with active trader-focused brokers such as Interactive Brokers, Lightspeed, and TradeStation. Furthermore, these brokers can sometimes charge monthly data fees or platform fees that can only be waived if a certain commission spend threshold is met. For example, Lightspeed charges an account service fee of $100 if at least $100 in trading commissions are not spent each month.
Misc fees - Annual fees and closure fees tied to an IRA retirement account, broker-assisted trading fees, mutual fund trading fees, short-term redemption fees, phone order fees, and similar all add up. IRA Closure fees typically run at around $50, and are worth keeping an eye out for.
What miscellaneous fees are charged? Annual fees tied to a retirement account, broker-assisted trading fees, mutual fund trading fees, short-term redemption fees, phone order fees, and other various charges all add up.
Are there extra fees for trading penny stocks or OTCBB? Some discount brokers charge extra for penny stocks (stocks under $1 per share) and pink sheets. If you like trading these types of securities, read our guide to the best brokers for penny stock trading.
Ignore regulatory fees. Finally, two fees every broker charges (sell orders only) include an SEC trading fee of $21.80 per $1,000,000 of principal and a FINRA Trading Activity Fee (TAF) of $.000119 per share. Investors can ignore these trading fees as they are the same for each regulated online brokerage and amount to no more than a few pennies per trade. For example, a 500-share market sell order of Disney (DIS) at $108.18 would result in a total fee of only $0.18 ($.12 + $.06).
The takeaway is this: When contemplating any broker, switch, or new account based on commissions alone, it is critical to understand what type of trader you are first, then research from there. How many trades do you place per month, on average? What is your typical order size? Do you buy and sell options? Do you frequently trade on margin? Do you trade ETFs or mutual funds? These are all relevant and useful questions to ask yourself.
To find out the true cost of cheap trading, don’t just trust our rankings, run the numbers yourself. Use the trading costs calculator here on the site, read our detailed commissions notes for each broker, then compare your top picks using the broker comparison tool to make a final decision. Four-dollar lattes may be too expensive, but then $.99 brews from the local gas station are anything but delicious. In the end, it is about finding that happy medium where quality and price come together to offer you the most appetizing choice.
Discount Brokers Summary
Here is our summary of the lowest cost brokers for both stock and options trading:
|Online Broker||Best For||Minimum Deposit||Commissions||Overall Rating|
|Fidelity||Best all-around investing experience||$0||$4.95||4.5 Stars|
|Interactive Brokers||Best pricing for active traders||$0||$0.005 per share||4 Stars|
|Merrill Edge||Best rewards program, earn free trades||$0||$6.95||4 Stars|
|Firstrade||Free trades, balanced offering||$0||$0||3.5 Stars|
|TradeStation||Flexible options commissions, great tools||$500||$5||3.5 Stars|
|Robinhood||Free trades, no tools or research||$0||$0||2.5 Stars|
- Best Online Brokers
- Best Brokers for Beginners
- Best Brokers for Options Trading
- Best Brokers for Penny Stocks
- Best Brokers for Day Trading
- Best International Brokers
To find the best online discount brokers for stock trading, we considered all the possible scenarios. Whether the trades involved 100 shares or 5,000 shares, $5,000 in equity or $1 million in equity, margin or no margin, we assessed it all. We also analyzed the actual net costs per month for casual investors who might make ten stock trades a month or hyperactive traders who might place 100 stock trades in one month. We also considered monthly minimums, platform fees, data fees, and other relevant costs.
To find the cheapest trades for options, we assessed whether the trades involved one contract or 100 contracts, $5,000 in equity or $1 million in equity, single-leg or multi-leg spreads, and more. We also analyzed the actual net monthly costs for casual investors who might make ten options trades a month of one contract each, or active options traders who might place 50 options trades a month with five or more contracts each. Learn more about how we test.
Still aren't sure which broker to choose? Ask us a question! Whether you are a beginner investor learning the ropes or a professional trader, we are here to help. Email us your online broker specific question and we will respond within one business day. It is our satisfaction guarantee.