First, you need to be aware of brokers commissions. If an online broker is offering you a commission rate of $100 or more, then you need to look elsewhere. The reason for this is that your profitable trades vanish and your losses on losing trades are magnified due to the high commission rate. A range of $20 to $35 for full service is reasonable. Discount brokerage fees would be even less than that. A discount online broker, in general, should charge less than $10 per trade. As your trading volume increases, your commission rate should take that into consideration.
Quick response is everything in todays volatile market. A quality online broker should offer a trading platform that provides streaming of real time price updates. Customers should have the ability to get real time data for Bid, Ask and Volume, giving them the ability to make trade decisions and stay on the cutting edge of the market. Essentially the online platform should provide comparable stock data information.
It is also important to ascertain just how much money you need to open your trading account. Each online stock broker has a minimum opening balance requirement. Some are as low as $500, most are around $1,000, and several are higher. The general rule of thumb is you should have at least $1,000 when you open an account. One should be careful because some brokerage firms may have a low opening balance but will charge you a maintenance fee if your balance falls below a certain amount. Although the fee may be as little as five to fifteen dollars per quarter, it can significantly eat up your investment returns if you are just starting out.
Determine how many stocks the online stock brokerage firm has access to. You want to ensure that your online stock broker can help you invest in any of the stocks you are interested in. There are online stock broker reviews or even demo accounts which could give you some idea of what the broker is offering.
For instance, some will allow you to instantly log in to your account via the Internet and print out an analysis of your portfolio, view the balance of your account for the past six months, check your realized and unrealized gains and view dividend payments for the past few years. Other online stock brokers may be light on these types of features, but offer tremendous research capabilities you cant get elsewhere.
Lately, a lot of brokerages have begun offering Visa Check Cards which work exactly like a credit card. The difference is, the money you spend is taken directly out of your brokerage account. This way, you have the combined functionality of a checking, savings, money market account with a stocks / bonds investment account. It is tremendously convenient and can help simplify your finances. If you are looking for an all-in-one solution, this may be a more attractive alternative.
Before you open an account, visit the web page of each of the online stock brokerage firms you are considering.Those basic guidelines should help narrow down brokerage list and help you find the one that serves you best.