The only thing you need to start trading online is a brokerage account. There are plenty of online brokers to choose from. They come and go regularly; these have been around for awhile: Charles Schwab, Fidelity, TD Ameritrade. Most online brokers offer basic brokerage accounts, trading platforms for active traders, charting, stock screeners, news, research, stock ratings, as well as bonds, CDs, mutual funds, portfolio management/analysis and financial planning tools. The menu is more or less standard. There is no one best thing, no one size fits all. Here’s how to get what you need:
1) All brokerage accounts automatically come with SIPC insurance to protect you against broker fraud or failure (but not market losses).
2) Make sure the broker meets your current needs. Your needs will change over time, but initially you may need some handholding. Talk to the prospective brokers. If they are eager to help – give them your business, if not – move on.
3) Find out what it takes to get an active trader platform (minimum balance, number of trades). Some platforms require you to download the software; others are web-based.
4) Some people want the lowest commissions, others – the most bells and whistles. To me the most important feature is how robust your broker’s platform is. You don’t want it to go down on the busiest trading day when a 5 min. delay in execution may cause you to lose thousands. Just ask the broker how their platform performed in the most recent market selloff – whether there were glitches, delays, etc., and see what they say. You can check their claims later online.
Build a Relationship with Your Broker
1) If the opening balance for an active trader platform is more than you are prepared to risk, it makes sense to still get it by consolidating scattered cash in one account and then only trade a portion of it. Stick the rest in a CD or mutual fund to avoid temptation, but it’s also a good way to build discipline – something you’ll need all the time.
2) Discount brokers (individuals, not firms) are not commission driven, but new assets are music to their ears. The more you bring in, the happier it makes them, and the more serious they consider your intentions to be. If the losing institution imposes account closing/transfer fees, ask the new broker if they would be willing to reimburse you.
3) Don’t jump around for 10 or 30 free trades or other promotions. It pays to have the broker on your side. You never know when you will make a trading error and need a favor from them to fix it.