Best Brokers for Commission-Free Trading in 2020

The StockBrokers.com best online brokers 2020 review (10th annual) took six months to complete and produced over 30,000 words of research. Here's how we tested.

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.

Best Online Brokers for Free Stock Trading

• TD Ameritrade - $0 stock trades, best trading platform
• TradeStation - $0 stock trades, great mobile app
• Merrill Edge - $0 stock trades, best rewards program
• Charles Schwab - $0 stock trades, excellent research
• E*TRADE - $0 stock trades, best for options trading
• Interactive Brokers - Best pricing for professionals

Trading Fees Comparison

Using our online brokerage comparison tool, here's a comparison of the trading fees and margin rates for the most popular discount brokers.

Margin Rates Comparison

How much does it cost to trade stocks?

When buying and selling shares of stock, most online brokers charge a flat commission per trade, regardless of the number of shares traded or the total trade value. With online stock trading, there is no free lunch; the lower you pay to place trades, the less you receive elsewhere (trading tools, market research, customer service quality or hours of availability, educational resources, etc.).

For example, say I want to buy ten shares of Apple (AAPL), which is currently trading at ~$199 per share as I write this. Effectively, I am investing $1,990 (10 shares x $199 per share) in Apple. When I click to buy those shares, I am charged one price for the entire order. Looking at examples, TD Ameritrade, Merrill Edge, TradeStation, and Charles Schwab all charge $0 per stock trade, while Just2Trade charges $2.95 per stock trade. Thus, my order would cost $0 or $2.95, respectively.

When I go to sell my ten shares of Apple, I am also charged the same flat commission for the transaction. If I decide to place two sell orders by selling five of the shares today and five of the shares tomorrow, I would then be charged twice.

It is important to note that not all brokers charge a flat rate per trade. More advanced brokers used for day trading charge a per-share rate. Similarly, "free" trading has become an option. As we all know, though, nothing is ever truly free, and the majority of these brokers are instead making money off payment for order flow (PFOF) thanks to their order routing and order execution practices. Earning yield off free cash sitting in your account is another popular way your online broker will generate revenue.

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 a 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 and Lightspeed. 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 $125 if at least $125 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).

Which is the best broker for free online stock trading? The best discount brokers offer $0 stock and ETF trades, feature-rich trading platforms, and robust research tools. Our top broker picks for free stock trading in 2020 are TD Ameritrade, TradeStation, and Merrill Edge.

Final Thoughts

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, 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.

Read Next

Explore our other online trading guides:

• Best Online Brokers for 2020
• Best Online Brokers for Beginners 2020
• Best Brokers for Day Trading 2020
• Best Brokers for Penny Stocks 2020
• Compare Online Brokers

How We Scored Commission-Free Brokers

To find the best online brokers for free 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 lowest cost brokers for options trading, 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.

Methodology

For the StockBrokers.com tenth annual best online brokers review published in January 2020, a total of 3,540 data points were collected over five months and used to score brokers. This makes StockBrokers.com home to the largest independent database on the web covering the online broker industry.

Participation is required to be included. Each broker completed an in-depth data profile and provided executive time (live in person or over the web) for an annual update meeting. Our rigorous data validation process yields an error rate of less than .001% each year, providing site visitors quality data they can trust. Learn more about how we test.

Still aren't sure which online broker to choose? Email 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.