I get this asked quite a few times and with the markets really starting to life off, its getting to be a more common question – “Which is the right online broker?”

Everybody has a different opinion and I will recommend a few, but at the end of a day, follow these criteria to better select the best fit for you needs.

The first thing I would ask you to consider is the amount of capital you are looking to start off with. Especially if you are in Canada. The reason being, unless you are going to trade three times or more a week, or have an initial capital of $100,000, there is no point in considering opening an account with a bank. Why? Simply, the commission rates are $30 vs other online brokers.

Second, consider the price of the trades each broker you are comparing is charging. You will notice, some will charge $9.95, $4.95, or even free! But cheaper is not always better. With the cheaper brokers, your trades might not always be executed within seconds and these delays in trades can take toll on profits if you are getting into a volatile stock. For a beginner, a cheap broker is quite good. Especially if you are new, and starting of with a small capital of $500 – $2000. A lot of my friends have been with cheap brokers such as TradeKing and have been quite content with the service.

Third, try to examine the support of the online or offline methods. I know many people will overlook this, or if they do call support, they will during off hours when the markets are closed. My suggestion if to look for support or call customer service during hours when the markets are open and see how long the wait is. With some brokers, you should get through within minutes. Anything longer should raise a warning flag if you are looking to sign up with the broker.

Fourth, is options. I am not talking about the trading of options, but literally the term options. What other ways can you makes trades? I recall a few times in the year when I am away from my computer or having internet issues and had to call into the broker and make a trade over the phone. This is when my third point came into critical importance and the option of having a different method of trading be essential for a profitable session.

Fifth, variety. Many online brokers have begun to not only offer trading, but also have starting offering the ability to open savings accounts or CD’s which make the flexibility of moving money around within one account more easy.

Sixth, hidden fees. Many will offer cheap trades but then charge to withdraw money from a broker account and deposit it into another account. Also if you don’t make any trades, you might get hit with inactivity fees. These can all really add up and then eat away at your profits. Look at the fine print for any hidden fees.

I usually give this “list” to my friends to consider when opening an account and personally have dealt with a few brokers in my time. I have had some really bad experience which has molded this criteria to make the process easier than it was for me.

In the past, for my Canadian account, I was with TDWaterhouse, but with a few mistakes on their part, I could not stand their service and charges. I will admit that the convenience of withdrawing money immediately was great, but it was not as important as customer service. Also, TDWaterhouse has a very old, basic platform for trading which really did not make sense. Many other banks have the same issues in Canada and that really drew me to switch to Questrade.

My family and friends have been with them and I got to use their account and now am on their platform too. Its very affordable, and there is many options – I can buy gold, options, Forex, and the trading system is amazing. There are also workshops for beginners and the customer service has been great so far. If your in Canada, give Questrade a try!

In the US, I am strong and happy with TradeKing. This company has gone above and beyond my imagination and even called me once when there was a problem with my account and not only fixed the problem but followed up to ensure everything was good. Since I trade virtually everyday, TradeKing has executed my trades instantly and my limit orders or stop losses have always worked out. Many people I knew were with Zecco because of their free trades, but now with changes to their minimum account balance, its become unreasonable for sticking with them since TradeKing offers more services for a smaller price. Switch to TradeKing and get up to $150 in transfer fees reimbursed.

If you have an itch to trade, the markets could not be in a better position for you to enter. Its very intimidating to get started and setting up an account can be really stressful if you dont ask the right questions. Hopefully these points and suggestions will help get you off on the right foot!

Happy Investing!

Aman, MBA

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