Best Online Brokerage: This article discusses how to choose the best online brokerage so that you can get started towards your journey of becoming a consistently profitable options trader.
Many people make things too complicated.
Online stock trading is one of those things.
Regardless of which broker you choose, your returns will likely not be materially impacted.
As a result, I recommend doing ~20 minutes of research and then simply getting started.
This article provides an online brokerage comparison between your best choices, depending upon your account size (and provides you with tips on getting signup bonues and negotiating the best rates).
Best Online Brokerage Key Points
Which Online Broker Do I Use?
Choosing an online stock broker can be very stressful and it seems that everyone has an opinion on the best trading platform for stock trading beginners and the best trading platform (if you're in Canada).
Bankrate recently came out with a good article, the Best online stock brokers for beginners and it provides a good online brokerage comparison.
While many blog posts write a top 10 brokerage firms, I believe that's excessive. US residents can use TD Ameritrade, E*Trade or Tastyworks.
And the best online brokers for non-us residents is Interactive Brokers.
The good news is that there aren’t substantial differences between the top online brokers.
Also, your results will not be materially impacted by your choice – so please don’t get anxious when choosing a broker for the best online stock trading for beginners.
I use the Power E*Trade Android App mostly because I'm comfortable with them and see no reason to switch.
I negotiated my commission structure with E*Trade and I currently pay only 10 cents per contract.
I also do not pay any commissions to close out or buy back options that are trading under 10 cents.
I make every trade using their Android App.
I can't recall ever using their website or desktop software to place a trade.
I have never used advanced charts, analyst research or any other premium product that online brokers offer.
As a reminder, I believe that Technical Analysis does not work.
Want to make money in the stock market? Keep things simple, don't get overwhelmed, and make good decisions.
Choosing the Best Online Brokerage for You
I’ve read a few other articles on how to find the best online brokerage and many of them say that investor education is very important.
My personal opinion is that if you're reading research reports then you probably aren't making any money.
As I've said numerous times, I believe that profitable trading is not about knowledge.
When you trade the way we teach, by selling option premium on the largest companies, all of the publicly available information is already priced into the current market price.
Yes, of course an occasional person will be correct with their random predictions (just like some people always win the lottery).
Yet overall, reading research reports (or listening to “stock experts” on CNBC) is not a good usage of time.
You can sign up for TastyWorks here (this is a referral link) - I'll provide you with a FREE week of Trade Alerts when you sign up with the referral link.
I also provide an in-depth Tastyworks Review blog post.
I do not agree with some of TastyTrade's philosophy (as discussed this video and this post).
But, overall, their content is valuable.
I found Interactive Brokers difficult to use and I always got charged small monthly fees.
Fidelity is decent, but it felt more antiquated and less flexible (I haven't used it since 2014 though).
I have also used TastyWorks.
I find Tastyworks to be the best online stock broker for beginners
But...it's not perfect.
I found TastyWorks to be incredibly slow when entering new trades.
It relies too much on a visual interface and it took me 5x more effort to enter orders than it takes me with E*Trade.
Regarding price, TastyWorks is competitive, however at $1 / contract (even with no closing commissions) it's still much more expensive than what I usually pay (10 cents a contract).
Additionally, Tastyworks passes on all exchange fees (about 14 cents per contract) - that's about 6x more than I pay with E*Trade.
If you have a small account, Tastyworks is definitely a good choice - primarily because it permits its users to easily get approved for selling naked options.
However, as I said, I'm not a fan of the TastyWorks’ user interface platform.
I find it very tedious, slow and annoying to place trades.
My students use virtually every online brokerage firm. Their returns are not impacted by their choice.
It's best to go with a brokerage that offers a signup bonus and which allows you to trade naked options.
RobinHood is Not a Great Online Brokerage
The primary reason is because it doesn't permit you to sell naked options.
Selling naked options is the best options trading strategy
Selling naked options is a lot safer than trading vertical credit spreads as I explain in this video about why naked options are better than vertical credit spreads.
A few of my students also told me that they had their positions closed out automatically without being contacted by RobinHood.
New Online Trading Account Promotions
I would highly recommend going with the online brokerage that offers you the best sign up promotion.
If you have a large account ($100,000+) you should always call the online broker and ask them if they can offer you a special rate.
With a larger account, you can almost always negotiate your commissions by calling the online brokers - all it takes is a phone call!
Here is a recent article about online brokerage signup bonuses
Quick tip to save money on trading: Most online brokerages will negotiate on their commission structure (or even offer cash signup bonuses). All you have to do is call and ask!
Instantly Be a Successful & Profitable Trader
Copy My Trades with Real-Time Trade Alerts
TastyWorks Review - Receive a FREE Week of Trade Alerts
Many of my students use TastyWorks.
Use this TastyWorks link and fund your account with at least $2,000 to receive a FREE week of trade alerts.
Your Best Online Brokerage Depends Upon Your Account Size
If you have a small account ($3,000 and below), I recommend TastyWorks.
Sign up for TastyWorks here and receive a FREE week of my real-time trade alerts.
If someone with a small account were to use RobinHood, I wouldn't necessarily say that it's bad.
However, once you have over ~$3,000, then I feel that using RobinHood will hurt your performance because you won't be able to trade naked options.
Recommendations of the Best Online Brokerage Based on Account Size
Important Online Brokerage Reminders
Call your broker & request the ability to sell naked options.
Best Online Brokerage Conclusion
Remember that when learning a new skill, it’s important to not become overwhelmed.
Try to focus on taking small steps (open an account, place a few trades in the practice account, etc.) so that you make incremental progress towards your goal of earning ~50% every year.
For accounts under $3,000, I recommend TastyWorks or RobinHood.
For accounts between $3,000 and $100,000, I recommend TastyWorks
For accounts that are $100,000+, I recommend E*Trade or whatever online stock brokerage is offering the best new account sign up promotion.
Also, remember to always ask for the ability to sell naked options.
And accounts over $100,000 should call and request portfolio margin (and negotiate their commissions).
If you have any questions, leave a comment below 🙂
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