You are ready to invest in stocks but are unsure where to start? If yes, you have come to the right place. BestBrokers.com can get you going with a shortlist of the best online brokerages you can trade stocks with. There has never been a better time to tap into the stock market. Trading costs have hit an all-time low, while service quality has been ramped up due to the cut-throat competition in the industry.
Many new online brokers have arrived on the scene in recent years as demand continues to grow. While options are a great thing to have, the huge number of stock brokers on the web makes it a mean feat for investors to find the one that is the right fit for them. This is where our team can help you out.
We launched BestBrokers.com with one clear purpose in mind – to provide traders with comprehensive reviews of online brokerages. We research, evaluate, compare, and rate stock brokers to make decision-making a little less cumbersome for you, our readers. We are an independent platform that delivers unbiased rankings and information about trading sites where you can invest in stocks.
Best Stock Brokers
- 1. AvaTradeAccount Minimum$100Number of StocksOver 620Order Execution TypeDD/Market MakerWays to Trade StocksCFDs, ETFsFees & CommissionsNo commissions, AvaTrade profits from spreads, which start at 0.13% for most stocksLicensed byFCA (United Kingdom), FSA (Japan), CySEC (EEA), FSCA (South Africa), CBI (Ireland), ASIC (Australia), FRSA (Abu Dhabi), ISA (Israel), FSC (British Virgin Islands)CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Established in 2006, AvaTrade is a globally regulated brokerage with a strong presence in major financial markets like the UK, Australia, and the European Union. The trading site is home to more than 300,000 satisfied customers, who can trade a variety of assets at competitive spreads with zero commissions.
AvaTrade does not charge any commissions on stocks as it generates profits from the spreads built into the trades. Trading shares is cost-effective here as the spreads are generally low compared to those of some rival brokers. Stock traders face a decent choice as they can trade in shares of over 620 major and smaller companies.
The brokerage gives its clients access to stocks from some of the world’s largest exchanges, including the FTSE, NYSE, and the US Tech 100. Most of the available shares are for US companies but Canadian, UK, and German stocks are also among the options. Clients can make gains even from the most minuscule price fluctuations of the stock markets through contracts for difference (CFDs).
AvaTrade gives you the flexibility to profit both from rising and declining stock prices. You can gain greater exposure to the stock market by leveraging your derivative positions at a maximum ratio of 5:1. The minimum size of stock trades is 0.1 only.
- 2. IC MarketsAccount Minimum$200, applies to all accounts (Standard, Raw Spread, and cTrader)Number of StocksMore than 1,600 big-cap stocks CFDsOrder Execution TypeECN pricing modelWays to Trade StocksStock CFDs, Stock Index CFDsFees & CommissionsNo commissions on standard accounts, the broker uses a spread markup insteadLicensed byFSA (Seychelles), CySEC (EEA), ASIC (Australia), SC (Bahamas)Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 74.32% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Known for its integrity and fairness, IC Markets is a Sydney-based online broker that specializes in financial derivatives. The company inspires confidence in its customers as it holds licenses from the financial authorities of Australia, Seychelles, Cyprus, and the Bahamas. IC Markets delivers CFDs for a broad range of asset classes, including forex, equity shares, commodities, indices, digital currencies, and bonds.
Equity traders can choose from more than 1,600 big-cap stocks CFDs of companies that trade on the world’s largest exchanges like NASDAQ, ASX, and NYSE. Stock trading is exclusively available via the MetaTrader 5 platform, which comes with sophisticated functionalities that will prove useful for beginner and seasoned traders alike.
At IC Markets, you can profit from the rising and falling prices of the world’s most groundbreaking companies like Apple, Tesla, Alphabet, Nvidia, Microsoft, and Amazon. Aussie traders can speculate on the price fluctuations of the biggest companies Down Under, including Westpac, BHP Billiton, and Woolworths Group.
Aussies and European customers can leverage their stock positions at a maximum ratio of 5:1. However, the leverage caps for professional clients are significantly higher, reaching a threshold of 500:1. Regardless of where they live, stock traders will benefit from a world-class ECN order execution with speeds of 40 milliseconds or less.
- 3. XMAccount Minimum$5 for Standard, Micro, and Zero accountsNumber of StocksAround 1,300 stocksOrder Execution TypeMarket maker modelWays to Trade StocksCFDs, underlying shares via Shares accountsFees & CommissionsNo commissions on Standard and Micro accounts, spreads vary across different equity sharesLicensed byIFSC (Belize), CySEC (EEA), ASIC (Australia)Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75.59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
XM is a globally recognized online brokerage that has been operating for more than twelve years. Established in 2009, XM has successfully expanded its business since its launch, presently reaching around 5 million customers from more than 190 jurisdictions.
The renowned broker offers a broad spectrum of trading instruments, including over 1,300 stocks. Traders can speculate on price uptrends and downtrends through contracts for difference without owning any underlying shares. XM’s portfolio of stock CFDs features companies from 18 or so countries, including the US, the UK, Canada, Germany, and Russia.
You get the chance to open leveraged contracts for shares of the world’s largest companies in terms of market cap. Some examples include BP, Alibaba, Facebook, Google, and Coca-Cola. EU and Aussie retail clients who trade on margin can increase their exposure by using maximum leverage of 5:1 for stocks.
CFD trading is not the only way to dabble the stock market at XM. Clients who create Shares accounts gain access to actual stocks, which means they can purchase or sell shares in US, British, or German companies. All US stocks come with commissions of $0.04 per share ($1 minimum per single transaction). The commissions for German and British shares stand at 0.10% per share. Note that this instrument class is unavailable to clients from some jurisdictions.
- 4. CMC MarketsAccount Minimum$0 for Corporate and CFD accountsNumber of Stocks9,400 stocks and 1,000 ETFsOrder Execution TypeDD pricing modelWays to Trade StocksCFDs, ETFs, spread bettingFees & Commissions2 cents per share for US stocks, 0.10% or 0.18% for other sharesLicensed byBaFin (Germany), FCA (United Kingdom), ASIC (Australia), MAS (Singapore), IIROC (Canada), FMA (New Zealand)Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 72% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
CMC Markets is one of the veterans of the trading industry, having been in operation since 1989. With over thirty years of experience up its sleeve, CMC Markets has become an industry leader in the provision of derivatives and spread betting services. The company’s dedication to quality has earned it more than fifty trophies, including for Financial Services Provider of the Year at the 2014 Shares Awards.
The widely acclaimed brokerage operates under the regulatory glare of several watchdogs like MAS, FCA, and ASIC. CMC Markets supports trades on thousands of financial instruments, including over 9,400 shares from more than twenty countries. Customers can profit from share price movements with CFDs for popular stocks such as Facebook, Apple, and DBS.
Traders looking to speculate with US shares face the most diversity, having a choice from more than 4,300 stocks. The margin rates for leveraged stock positions are either 10% or 20%, depending on what you trade. Clients additionally can choose from more than a thousand ETFs, with spreads starting at 1.0 points and minimum commissions of $10. Spread betting on shares is an option only for Irish and UK traders who seek to gain tax-free exposure to the financial markets.
- 5. IGAccount Minimum$250Number of StocksMore than 12,000 international stocksOrder Execution TypeDirect Market Access (DMA), ECNWays to Trade StocksCFDs, spread betting, ETFs, barrier options, underlying sharesFees & CommissionsNo spread markup for share CFDs, 0.10% per side for UK and European stocks, $0.02 per share for US stocksLicensed byBaFin (Germany), FCA (United Kingdom), ASIC (Australia), FINMA (Switzerland), MAS (Singapore), FSCA (South Africa), CFTC and NFA (United States), FMA (New Zealand), DSFA (Dubai), JFSA (Japan)Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 74% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.
IG started as a spread betting provider in the mid-1970s and was established by British financial mogul John Stuart Wheeler. Initially known as IG Index, IG has significantly expanded its operations over the last 45 years. The company has authorization to provide its services across five continents and is fully compliant with the requirements of regulators like ASIC, FCA, MAS, FSCA, and CFTC.
It presently has over 313,000 registered clients, offering them an immense choice from more than 17,000 financial markets. IG customers face no shortage of options when it comes to share trading. Leveraged CFDs are readily available, but share trading is also possible through spread betting and more advanced derivative instruments like barrier options. Underlying share dealing is yet another alternative for IG customers.
The broker supports trading in more than 12,000 shares from over twenty countries like Australia, Switzerland, Japan, Canada, the US, Singapore, and the UK. IG does not attach spread markups to shares but rather charges traders on a per-side basis for most non-US stocks. The commissions align with the industry standards and stand at 0.10% per side for EU and UK shares.
The BestBrokers Review Team
All reviews you will find at BestBrokers.com are based on reliable and impartial information. Our team of reviewers consists of experienced writers, traders, and researchers who go above and beyond to deliver comprehensive and fair-minded information about online stock brokers. The members of our team have several decades of collective experience in the field of finance writing and investing.
Apart from their extensive expertise, our writers rely on a rigorous reviewing process that aims to ensure thoughtful, in-depth assessment of stock brokers, their products, and services. Our specialists frequently revisit the online brokerages they recommend to update the reviews and their ratings, if necessary. This enables us to always deliver fresh and accurate information that can help readers find reliable stock brokers that meet their needs.
The BestBrokers Review Methodology
Our team of writers and researchers implements a proprietary broker evaluation methodology that allows them to accurately assess each stock broker’s product offering and services. This rigorous reviewing process enables us to differentiate shady brokers from reliable ones, bringing you the top-of-the-top sites you can trade stocks at.
We Bring You Up-to-Date Stock Broker Reviews
The seasoned writing and research staff behind BestBrokers.com constantly revises and fine-tunes its methodology, which allows them to assess any stock broker service. We frequently tweak our approach based on our own experiences as well as those of our readers and fellow traders. At BestBrokers.com, we consistently update our older reviews while also adding new ones to expand the database and provide you with a richer selection of reliable options.
We Test All Reviewed Stock Brokers with Live Accounts
We are not here just to promote trading sites and lure you into signing up to reap the dividends from your registration. All reviews and rankings readers see at BestBrokers.com are based on first-hand experience. We create live accounts at each stock broker we review and deposit into their balance so that we can test the products ourselves.
Our team members test the support service anonymously, trade with each platform on multiple devices, and request withdrawals via different payment methods. All of this helps them get a clear idea of the overall experience each trading site provides.
We Use a Multi-Area System of Ranking
Once we have researched and tested the stock brokers, we assign scores based on our findings. The team rates each broker’s performance using a multi-area ranking system, assigning individual scores based on different factors. The brokers then receive a final rating that accurately reflects their overall performance, ranging from bad with one star to great with five stars. We round the scores to the nearest half-star.
Main Areas of Stock Broker Evaluation
When we review a broker, we strive to give you the full picture of its product range and service quality. Our team achieves this by implementing a multi-step evaluation system that covers several areas which impact stock traders’ overall consumer experience. Here is what we pay close attention to:
Regulation and Security
We carefully map each stock broker’s legal and regulatory profile by checking which authority regulates it and what level of investor protection it offers. The best brokerage firms are regulated by top-tier financial watchdogs like the FCA, ASIC, CySEC, and FINRA, among others. To weigh this area adequately, we also consider the brokers’ background and their longevity in the industry.
Account Registration Process
As previously mentioned, we take the time to create live accounts with each broker as this allows us to determine how easy and hassle-free the registration process is. Sometimes the verification procedures and the associated documents you must send are not clear and straightforward enough, which works to the disadvantage of inexperienced stock traders. Registering also gives us a glimpse at the available account types and minimum deposit requirements each broker imposes.
Commissions, Fees, and Other Related Costs
The team behind BestBrokers.com collects information about the cost of trading stocks with the different brokers straight from their websites. The lower the commissions a stock broker charges, the higher the rating it gets. We additionally check the fees for other asset classes like forex and commodities. To determine the actual cost, we open positions, hold them for a while, and then close them. We also consider potential non-trading costs, including deposit, withdrawal, and inactivity fees.
Selection of Investment Instruments and Stocks
Our team also rates brokers based on the range of products and investment instruments they offer. Platforms that allow you to trade with stocks, as well as bonds, currency pairs, mutual funds, futures, cryptocurrencies, and commodities, receive the top marks in this subcategory. Another thing we check is whether a broker enables you to trade with fractional shares. If it does not, we give it a higher score for this area.
Stock Trading Platforms and Software
The type of software a broker uses can impact both your trading experience and bottom line. During the reviewing process, we carefully consider order execution speeds, the platforms’ features, and what devices they are compatible with. If a platform offers dedicated tools for advanced technical analysis, charting, and screening, we reward it with a higher rating. The overall usability of the platform is also important to us.
Deposit and Withdrawal Options
Our reviewers deposit and withdraw to and from their live accounts to see how seamless payments are with each broker. This also gives them a glance at the processing timeframes and any potential payment-related costs. Another thing they weigh in is the range of available banking options. A stock broker that supports free card and e-wallet payments inevitably scores higher with us than one that only works with bank wire transfers (which normally carry additional charges).
Educational Materials and Research Tools
At BestBrokers.com, we highly value trading sites with well-structured and comprehensive educational content. Materials like stock trading guides, free webinars, videos, and podcasts enable novice traders to lay the foundations. Experienced clients can use them to fine-tune their strategies and improve their skills. The availability of research tools like tickers, market sentiment data, and trends is equally important.
Support and Customer Care Level
We personally test each channel available for support communication, including live chat, telephone lines, and email. When conversing with chat representatives, the team uses a fixed set of questions that enables them to adequately evaluate the level of customer service. Brokers that provide professional, highly efficient, and round-the-clock support earn the highest scores.
Setting Up a Live Stock Broker Account
You are new to trading stocks over the internet? No worries, we shall guide you through the process of account registration at our recommended stock brokers. All high-ranking brokerages facilitate effortless, quick, and straightforward registrations, enabling you to start trading stocks after a few easy steps.
- Fill in your correct personal details, including your country of residence, first and last name, valid email, birth date, permanent address, and telephone number.
- Open your email to find the login details the broker has sent you so that you can access your new account. You can change your password later in your account’s setting.
- Select the trading platform you want to use for trade execution. Many brokerages provide a multi-platform choice, allowing you to pick from established platforms like MetaTrader4, MetaTrader5, and cTrader.
- Select your desired account type. Our recommended brokers typically give you a choice from various account types like swap-free, retail, and professional accounts. Choose wisely as this also determines the minimum investment you must commit with to start trading stocks. Keep in mind some companies also offer joint and corporate accounts.
- Provide information about your financial background and stock trading experience. Many brokers that support leveraged trading will ask you to complete brief questionnaires to establish whether you are fit to hold a live account. They will inquire about your employment status, annual income, estimated net worth, and previous experience.
- Select a secret security question and answer. In some cases, the broker uses your security question to verify your identity via email, telephone, or live chat.
- Upload copies of your documents to verify yourself. They normally ask for proof of identity (via an ID card, driver’s license, or passport) and proof of residence (via recent bank account statements or utility bills). If all documents are intact, brokers usually complete the verification within one to two business days.
- Transfer some funds to your live account so that you can start investing real money into stocks. You have various deposit options, with the most common ones being cards, virtual wallets, online banking, wire transfers, and checks.
Types of Stock Broker Trading Accounts
Traders must select the account type that best accommodates their investment goals, style, budget, and experience level. We recommend you start with a demo account if you are new to the markets.
Demo accounts enable you to broaden your experience in a risk-free manner by trading stocks with virtual money. If you exhaust your demo balance, you usually have the option to retop it. Seasoned stock traders have a choice from several live account types, including:
Cash Accounts vs. Margin Accounts
Investors who open cash accounts trade with the available funds in their live balance or use their long positions to cover the costs. Those who use margin accounts essentially borrow money from the brokerages which enables them to trade on margin and use leverage.
Let’s assume you create a margin account and open a short position for AMZN stock as you are confident the price may decline in the future. The price indeed drops and you take a long position for the same stock to cover your short position, profiting from the price difference.
Retail Accounts vs. Professional Accounts
Retail accounts cater to the needs of retail traders, allowing them to tap the stock market and invest in shares with smaller starting capital. Retail customers are generally less experienced, which is why brokers impose caps on the maximum leverage they can use.
Seasoned traders can set up professional accounts provided they meet the brokers’ criteria. They need a substantial portfolio, significant trading volume, and one or more years of experience in the financial sector. When trading on margin, such investors can take advantage of higher leverage rates since they use a percentage of their shareholdings as collateral.
Self-Managed Accounts vs. Managed Accounts
Many of our shortlisted stock brokers also give you a choice from self-managed and managed accounts. In the first case, you manage all trading activities in your account on your own. You must possess sufficient experience, time, and knowledge to do so.
With managed accounts, you have a professional investment advisor handling the trades on your behalf. In turn, this renders managed accounts a great option for people who are not confident enough in their trading skills.
Individual Accounts vs. Joint Accounts
Individual accounts link to the name of a single owner. By contrast, joint accounts are shared by two or more persons, who are typically spouses, relatives, or business partners with mutual stock investment goals.
Islamic, or swap-free accounts, are available at stock brokers who do not want to alienate clients of the Muslim faith. Their religion disallows earning or paying riba, i.e. interest. Islamic accounts lack any rollover interest for trading contracts that last more than 24 hours. In many cases, they also provide traders with the option to use interest-free leverage. Being approved for a swap-free account is at your stock broker’s discretion.
IRA is short for the term “individual retirement account”. In essence, these serve as savings accounts that come with various tax benefits, enabling you to invest in a broad array of financial instruments, including stocks, mutual funds, and bonds.
Types of Stock to Trade
Before you start trading stocks at one of our recommended brokers, you should familiarize yourself with the different types of shares out there. We can distinguish between two main types, common and preferred shares.
Most shares issued on the market belong to this category. They entitle you to ownership in companies, allowing you to receive dividends from some of the profits. The owners of common stock often have the same voting rights, i.e. each share they own grants them one vote.
Common stocks can be divided into Class A and Class B categories. The owners of Class A shares are entitled to ten votes per each share they own, while those who own Class B shares get only one vote per share. The main reasoning behind the existence of this dual structure is that it enables the companies’ founders to retain control over their assets.
Unlike common shares, preferred ones entitled you to partial ownership in a company and normally do not provide the owners with any voting rights. The dividends common stock owners can claim are variable, while those from preferred stocks are fixed.
Another difference is that if a company goes into liquidation, the preferred stock owners will get paid before the common share owners. Also, the company has the right to buy the shares from shareholders whenever it decides and for any reason it deems fit.
Stock Brokers Order Execution
If you decide to trade stocks with an online broker, it is essential to differentiate between the different stock order types and when they are suitable. This section gives you a glimpse of the main types you will encounter and explains under what circumstance it is appropriate to use them.
- The Market Order is the most basic and widespread order stock traders implement. It instructs the online broker to execute a trade straight away at the currently available price. Market orders ensure instant execution rather than buying or selling at a specific price. There are often discrepancies between the price at which you have sent the order and that at the time of execution.
- The Limit Order is an instruction for the broker to execute a trade at a predefined price. The broker might fail to fill the order if the limit the trader has chosen is too low or too high. There are several subtypes of limit orders, including sell limit, buy limit, buy stop, and sell stop.
- The Stop Loss Order stays dormant until the price passes a specific predetermined threshold, at which time it fills and transforms into a regular market order. Imagine you send your broker a stop-loss sell order for KO shares at $22 per share. Your order will remain inactive until the price escalates to or drops under $22. Knowledgeable stock investors implement this type of order to lock in their gains from profitable positions.
- The All-or-None Order is useful for small-scale investors who purchase penny stocks. It guarantees that you either buy the whole amount of stock you asked for at your preferred price or nothing at all. Suppose you send an order to purchase 3,000 shares of GSAT stock at $1.08 but only 2,000 are currently available. The broker will partially execute it for 2,000 shares at the requested price unless you put in an AON restriction, in which case the order will not fill until the whole bulk of 3,000 shares becomes available.
- The Fill-or-Kill Order poses as a combination between an all-or-nothing and immediate-or-cancel order. It instructs the broker to either fill your entire order right away or cancel it altogether. With this type of instruction, the broker never executes your trades partially.
- The Immediate-or-Cancel Order mandates the brokerage to fill partial quantities of your order within a very brief period, usually a couple of seconds or less. The remaining portion of the order gets canceled. Provided that no shares are available in the market or at your chosen limit within this brief interval, the broker will cancel the order altogether.
- The Good-Til-Canceled Order stays active until it fills entirely or the trader decides to cancel it. Keep in mind GTC orders do not remain active for indefinite periods despite what their name might suggest. Most brokers restrict the maximum time traders can keep them active to ninety days to prevent the sudden execution of forgotten orders.
Stock Trading Platforms
Choosing a robust platform is crucial both for your overall experience and your performance as a stock trader. Some online trading sites create their platforms in-house, while others prefer to stick to tried-and-tested software developed by third parties such as the Cyprus-based MetaQuotes.
The stock brokers that top our list of recommendations rely on advanced platforms that boast speedy execution, sophisticated features, and a wide range of analytical and research tools. Trading stocks on the go is an alternative as our recommended brokers offer robust applications compatible with broadly used operating systems like iOS and Android. Stick with us to read about the most widely used software platforms that facilitate stock trading.
- MetaTrader4, or MT4 for short, is courtesy of the above-mentioned MetaQuotes. The platform is customarily associated with currency pairs trading but it also supports a range of other instruments, including stocks, indices, hard and soft commodities, and decentralized currencies. MT4 includes over fifty technical indicators, multi-charting, nine timeframes, and one-click trading, among other useful functionalities.
- MetaTrader5, abbreviated as MT5, was released in 2010, around five years after its successor. It supports share trading with contracts for difference. It performs faster than MT4 and is richer in features, offering over twenty timeframes, hedging, Depth of Market (DoM), and an economic calendar. MT5 uses another programming language for auto trading (MQL5), which means MetaTrader4 users accustomed to MQL4 will have to learn entirely new coding.
- ProRealTime is the perfect fit for stock traders keen on technical analysis. The software is courtesy of the French company IT-Finance and only has a browser-based version. The platform supports various instrument types, including forex pairs, stocks, options, indices, futures, and commodities. The only drawback is that ProRealTime is unavailable to traders from some markets like Australia and the USA.
- cTrader ranks as the third most popular trading platform, right behind MT4 and MT5. The Cyprus-based Spotware Systems introduced it in 2010 with a focus on forex CFD trading. Nonetheless, cTrader is a multi-asset platform, allowing you to buy CFDs for commodities, stocks, ETFs, and indices.
It comes with many useful features, including DoM tracking, automated trading, chart trading, and QuickTrade functionality. On the downside, cTrader is only available for installation on desktop devices running on Windows 7.0 or higher. Traders who use other operating systems can load the browser-based version, cTrader Web.
- Developed by TD Ameritrade in 2009, Thinkorswim is geared toward the needs of self-directed investors from the US, who seek to trade with options, stocks, and futures. The platform supports social trading and provides customizable tools that aim to improve users’ financial literacy. Compatible with both mobile and desktop devices, Thinkorswim is among the few trading platforms you can install on your Mac (requires macOS 10.11 or higher).
Costs Associated with Stock Trading
Investors must be aware of the costs associated with stock trading as this will help them maximize their returns and minimize their expenses. We have reviewed and traded with multiple brokers over the years, which helped us identify the most common charges that can affect your average costs of stock investing. Check them out below.
- Spreads are hidden fees built into your trades. They represent the small gap between the buy and sell prices when you trade different securities or assets. With stock option trading, the term spread denotes the difference between the market values and the strike prices.
- Commissions are sometimes charged for the execution of trades on stock shares. The exact charges vary across different brokerages and are often flat, meaning that the fees remain the same no matter how many shares in a given stock you have bought. You might also be charged on a per-share basis where you pay for each share you trade. This commission structure is typical for many day-trading brokerages.
- Rollover fees apply when a trader holds an open leveraged position overnight. Their purpose is to cover the expenses associated with maintaining your position open and differ based on its direction (sell or buy).
- Management fees result from hiring a professional to manage your asset portfolio based on your individual investment goals and objectives.
- Inactivity fees sometimes apply when investors fail to register any trading activity on their accounts over a given period. The brokers will then deduct nominal monthly fees for account maintenance to make up for the absence of commissions.
- Payment fees may be in place when you transact with some stock brokers, although most cover the potential expenses associated with depositing. Nominal fees may apply for withdrawing via specific methods at some brokerages, but these rarely exceed $5 per request.
Stock Broker Regulation
We already mentioned this but it bears repeating. You must always go for regulated stock brokers that adhere to the financial industry’s highest standards of security. Regulated brokerages enforce various measures to protect their clients’ funds and never use them for their operating and businesses expenses. You can read more on this subject in the next section. We shall now give you a glimpse of the strict financial watchdogs that oversee our recommended stock brokers.
- ASIC (Australian Securities and Investments Commission) has been supervising the financial markets Down Under since the early 1990s. It also oversees the operations of the ASX, the Australian Securities Exchange (Sydney Stock Exchange in common parlance).
- FCA (Financial Conduct Authority) regulates more than 51,000 financial services companies within the UK. It also has the mandate to oversee the operations of the London Stock Exchange, whose value of tradable shares exceeded 3.8 trillion as of October 2021.
- CySEC (Cyprus Securities and Exchange Commission) regulates the financial industry in Cyprus and the Cyprus Stock Exchange. The watchdog conforms to the regulatory framework of the European Union and the guidelines outlined in the Markets in Financial Instruments Directive (MiFID). Cyprus-licensed brokerages can service clients from other member states of the EEA, but must restrict the maximum leverage available for retail stock trading to 5:1 under MiFID.
- SEC (Securities and Exchange Commission) is a regulatory agency that supervises the securities markets in the United States. At the time of writing, SEC regulates the operation of eight US stock exchange operators, including the world’s largest bourses in terms of market capitalization, Nasdaq and the New York Stock Exchange.
- FINMA (Swiss Financial Market Supervisory Authority) is a governmental agency responsible for the oversight of Swiss banking institutions, brokers, stock exchanges, and insurance firms. Switzerland is not part of the European Union, but it still has strong ties with the EEA single market. As a result, FINMA-regulated stock brokers have the option to provide their services to clients based in EU member states.
- BaFin (Federal Financial Services Supervisory Authority) is an independent body tasked with the supervision of the financial industry in Germany. The country is home to several major stock exchanges, including Börse München, the Berlin Stock Exchange, the Frankfurt Stock Exchange, and the German Stock Exchange whose market cap stood at $2.25 trillion in October 2021. Individual exchanges are also subject to the regulation of the corresponding supervisory authorities of the federal states.
Security and Safety of Funds Measures
Trading stocks with licensed brokerages comes with the added benefit of having your peace of mind where security is concerned. You will also have a safety net in case the brokers are driven into bankruptcy for one reason or another. Here are some of the measures implemented by the stock brokers we recommend.
- Watertight SSL encryptions mask the sensitive information you share when transacting with your online brokerage. They serve as a shield, preventing hackers and other malignant individuals from accessing your personal and financial details.
- The minimum net capital requirements render it compulsory for regulated brokers to maintain a certain amount of their operating capital in liquid form. The exact minimums are jurisdiction-specific and aim to minimize the probability of a potential broker collapse.
- Client protection rules most commonly require regulated brokers to keep the assets of their customers separately from their operating capital. The practice prevents brokers from misusing their clients’ money for business expenses. It also ensures traders will get their cash and securities back if the broker goes bust.
- Negative balance protection is available to investors who leverage their stock positions and trade with capital borrowed from their brokers. It is a precautional measure that prevents you from losing more than your balance.
- Maximum leverage restrictions apply to retail customers who trade with CFDs at regulated brokerages. The maximum leverage such clients can use varies across jurisdictions, but the underlying volatility of the traded instruments also matters. EU-regulated brokers cannot provide leverage of more than 5:1 for individual equities.
Stocks and indices appear similar but they are not. When trading stocks, traders are entitled to one or more shares of ownership in a given company. You possess the stock or a share of it after you buy it and may sell it to others.
Indices measure how the prices of a group of stocks perform. For instance, the S&P 500 tracks the performance of 500 of the biggest companies that trade publicly on the US stock exchanges. Incorporating indices in one’s portfolio is a good way to diversify it while enjoying lower levels of volatility.
Our team is committed to providing the readers of BestBrokers.com with accurate and up-to-date information. We continuously improve our reviews and update them throughout the year, if necessary. The reviewers routinely monitor the featured stock brokers for any potential changes in pricing, trading costs, and product offering.
Well, it is all relative as your level of security largely depends on whether or not you are trading with a regulated stock brokerage. We advise you to pick only regulated brokers that have obtained authorization from leading financial watchdogs like the FCA, CySEC, or ASIC.
To spare you the drudgery of performing research on your own, we have included only properly licensed stock brokers where you can trade confidently in a secure environment. The companies we recommend implement various industry-standard security measures, including funds segregation.
There are various reasons why people decide to invest in stocks, starting with capital appreciation. Experienced traders purchase shares at a given price only to sell them at a later stage when they become more expensive. Others do it to generate additional income through dividends. Investing in the stock market is also a viable approach when it comes to portfolio diversification.
If you are new to stocks, we suggest you look for brokers that facilitate fractional shares trading. This will enable you to purchase only portions of the stocks you are interested in rather than the entire stocks. Fractional shares are a great alternative for traders with limited capital at their disposal. You can diversify your portfolio by buying stocks based on a pre-chosen dollar amount instead of paying the full price for whole shares.