If you are about to start your journey as an investor in stocks, choosing the right online broker is one of the most challenging decisions you will make. As the retail investing world continues to grow, it can be hard to settle on which broker is the best for you, as there are so many types of assets you can buy and so many new brokers on the scene.
According to many experts, the stock market is one of the best places to put your money to work, with the market being able to prove it can provide a consistent return on investment over time. Technology has brought in a new age of easy investing, and it has never been simpler to figure out how to purchase and invest in stocks online. Your broker’s trading platform is the tool that puts you in contact with the markets as you buy and sell securities like stocks, making the trading platform one of the most important items to consider when deciding on a broker.
How do you find the best broker for your needs? If you want to trade in stocks, it all depends on your investment approach and the features you require the most. If you want to know a little more about the best stock brokers online, we can help you. Our team of experts has created a list of the best trading platforms and what you should seek as you go about achieving your investing goals.
What Is an Online Stockbroker?
An online stockbroker is a financial firm that allows you to buy and sell stocks on global indices via a brokerage account through an online trading platform. Online brokers can develop their own online platforms or they can buy a third-party trading platform. An online brokerage account is a place you maintain and manage your portfolio of cash and securities. For the remainder of the article, when we mention an online stockbroker, we are referring to the firm, as opposed to an individual at the company. Individuals assigned to your account are now called account managers, when they used to be known as stockbrokers.
Online brokerage firms have come to replace old-fashioned human financial advisors who would advise you how to buy and sell stocks, bonds, mutual funds, exchange traded funds (ETF), or cryptocurrencies. Online stockbroker firms act as intermediaries between you and the stock exchange on which you trade. They send your orders to stock exchanges and market makers, and they in turn match your buy order with someone who wants to sell, or vice versa.
Online brokers are sometimes called discount brokers because they can facilitate a large discount when compared to what a traditional physical brokerage firm can do. With an online broker, you also don’t receive the same financial advice or investment recommendations that full-service brokers typically can give.
In the old days, you would contact an individual known as a stockbroker, who placed the order on your behalf, often over the phone or an antiquated ordering system. This process was time-consuming and costly. Today, you can place orders with the push of a button on a trading platform.
Online brokers have access to thousands of leading company shares. Traders can go short or long while they trade shares on a contracts for difference (CFD) basis. Clients can access worldwide exchanges in financial centers like New York, London, and Frankfurt with great ease.
Do I Need a Broker to Trade Stocks?
The stock market is one of the largest financial markets in the world. It is large and complex and it takes time to learn how to navigate it. It is true that you can handle your purchases on your own. In that case, there is no need to hire a conventional stockbroker. This is done through direct access trading.
This form of trading allows you to trade with market makers and specialists. You don’t go through a broker. Direct access traders use specialized software, which is totally legit, that links them electronically to the major stock exchanges.
It is not mandatory to use an online broker, but traders find it is well worth the time and effort and it is also just more practical. This is because brokers are experts in the field who can offer guidance and advice and can shorten the learning curve of trading stocks. The truth is that trading stocks on your own can be tricky, especially if you are a newbie. This technical and complex field often calls for a broker.
If you are new to the game, you will find a lot of use for an online stockbroker. A well-constructed stockbroker Website and trading platform can help you with research and data analysis, which in turn helps you make quicker decisions.
Regulations Around Stock Trading
Stock trading is a long-established practice that is legal in all major markets. One notable exception for Sharia traders is that they are not allowed to purchase the shares of companies that engage in haram activities, such as alcohol production or gambling.
As far as regulation goes, all brokers must be regulated by a major oversight body. Some common regulators include the Financial Conduct Authority (FCA) in the UK. In Cyprus, brokers are regulated by the Cyprus Securities and Exchange Commission (CySEC). Australia has the Australian Securities and Investments Commission (ASIC), while US brokers are under the control of the Securities and Exchange Commission (SEC).
Many brokers have multiple global offices and keeping all these memberships compliant and current is a testament to any broker’s ongoing commitment to maintaining investor fund safety. Many online stockbrokers go the extra mile in terms of investor fund protection and take out additional insurance so that investors can be compensated in case the broker goes insolvent.
Regulators perform many functions. However, the most important ones relate to making sure that brokers in their jurisdiction are registered and abide by a set of operating rules and norms. Some regulators also have disciplinary powers over regulated entities and persons associated with them. These regulators often require periodic reporting of information by companies with publicly traded securities. The oversight provided by regulators means it is always the best advice to choose a broker that is regulated by a top-tier regulator.
Best Stock brokers in 2023
Here are our top four stockbrokers for this year:
Interactive Brokers, known as IBKR, founded in the US in 1977 has become one of the most successful online brokers in the world. It is a company that is driven by excellence and innovation, and during its long history has continually shown its commitment to pushing the boundaries of trader usability and experience.
Proprietary Platform, Web platform
Robust global regulation.
Competitive low margin rates.
Vast market access.
Fractional share trading offered.
Excellent platforms for traders of all experience levels.
Smart order router to optimize trades.
Strong research and tools.
Lowest financing rates in the industry.
Interest paid to traders for share lending.
IBKR Lite customers cannot use the smart order router.
Small or inactive accounts generate substantial fees.
eToro is considered to be a modern-day broker. Get an in-depth review covering safety, fees, instruments variety, special features and more. Make sure to read the full review before depositing your money.
Bank transfer, Credit Card, Electronic Banks, Crypto
Proprietary Platform, Web platform
Active social trading community.
Excellent social trading platforms.
Attractive investor program.
Wide array of tradable assets.
Limited research and education resources.
Spreads comparatively high.
Trade copying requires a high balance.
High account opening deposits.
No automated trading.
Fidelity Investments is a diversified financial services firm in the US. It has a strong full-service stockbroker offering and is considered by many industry experts to be the largest US stock brokerage firm. The firm was founded in 1946 in Boston and has spent several decades offering financial services products and solutions to individuals and companies.
Priority Platform, Active trader Pro
Commission-free US stocks and ETFs.
Powerful trading platforms.
Excellent research tools.
Educational resources for all levels of investors.
Strong customer service desk.
Large selection of no-transaction-fee funds.
Offers expense ratio free index funds.
Wide selection of mutual funds.
Highly rated mobile app.
High mutual fund fees.
Account verification can be slow.
Relatively high broker-assisted trade fee.
Lack of futures, cryptocurrency trading and conventional FOREX trading.
Platform design can appear outdated.
Portfolio analysis feature does not have an in-depth view.
This broker does not provide negative balance protection.
Robinhood has had a colorful history in its short existence. Its cultural popularity should not absolve it from serious scrutiny for a string of bad management decisions that would have sunk less fashionable companies. Traders are advised to analyze its value proposition carefully.
Credit Card, Wire Transfer
Simple and intuitive trading platform.
Low trading costs.
Access to fractional share investing.
Access to a range of cryptocurrency trading opportunities.
Good cash management product.
Has been part of many high-profile controversies.
Limited research and educational resources.
Limited investment offerings.
Does not offer FOREX trading.
Is not available outside the US.
Lack of transparency around payment for order flow.
Trading platform lacks advanced features.
Accounts only supported in USD.
Account funding is slow and tedious.
Full-Service Vs. Discount Brokers
The catch-all term “stockbroker” has over time been replaced by online firms acting in two categories: “discount brokers” and “full-service brokers.” These names more accurately capture what they do.
The online stockbrokers you will deal with from your home office are known as discount brokers. They do not perform the traditional function of giving you advice on stock picks. That was the function of a person who was your stockbroker from a bygone era. Rather, discount brokers give you the chance to buy and sell stocks through their trading platform from the comfort of your home. Discount brokers focus on providing a stripped-down service, meaning they can charge you very small amounts. It is not uncommon for online stock brokers to charge $0 to place a stock trade. Another thing that makes discount brokers attractive is that they can allow you to start trading with small initial investments.
Some online brokerage firms are known as “full-service brokers.” These companies closely resemble traditional stockbrokers in that they are staffed by a human account manager who can help you make a trade, find mutual funds in which to invest, or even offer you other financial services, like retirement plans. One of the main drawbacks of this type of broker is that they are expensive. Some full-service brokers can charge upwards of $50 just to make a stock trade. Usually, their fees are tied to the size of the trade, meaning it is common for you to have to pay hundreds or even thousands of dollars when finalizing a big trade. Full-service brokers also have high account minimums. Some top-end full-service brokers only deal with high-net-worth individuals who have assets of over $1 million.
However, these two types of brokers no longer operate within these extremes. As brokerage firms try to capture more market share, there is a move toward discount brokers creating higher-end products and full-service brokers opening up more affordable options, too.
Active Vs. Day Trading
Active traders are investors who carry out ten or more trades per month. Active traders rely on the timing of the market, taking advantage of news events to make a profit. Day trading is conducted by investors who make a lot of small trades daily with the aim of making small amounts of profit many times over.
Day trading was first popularized by human stockbrokers who operated from the trading floors of the world’s best-known indices. Before technological advancements allowed a wave of retail investors to join the trading movement while operating from home, stockbrokers would compete fiercely to buy and sell assets on behalf of their clients in a brick-and-mortar commodities or stock exchange building. Most of these trades were opened and closed within the same daily trading session, hence the name “day trading.”
Therefore, day trading, even though it is now performed digitally, is a style of trading where traders buy and sell assets within the same trading day. Why is this noteworthy? Well, since some types of trading take place over days, months, and even years, it is worth making the distinction that some types of trade happen within a day.
With day trading, the idea is to make use of price fluctuations or gaps in the market to make many small profits that accumulate due to the sheer number of orders the trader makes. This form of trading, sometimes also called “intraday trading,” requires a powerful online broker that can facilitate rapid execution with very few service failures. However, there is a downside to day trading, given the proliferation of investors who have entered the market with the intention of using this sometimes controversial trading style to soak up liquidity and compromise the execution speed of slower investment styles. Some brokerage firms have limited or even banned day trading.
Difference Between CFD Trading and Share Trading
The primary difference between CFD trading and regular share trading is that CFD traders do not buy the underlying asset but instead speculate on its future performance. Share traders, on the other hand, buy the stocks outright. CFD trading allows you to trade on margin using leverage provided by your broker. This simply means that you only need to put up a small fraction of the value of the trade to be able to speculate on the performance of the stocks. Many traders know that leverage trading is attractive because you can make good profits, but you can just as easily lose a lot of money. Share traders, by comparison, must put up the full value of the shares in which they are investing. An important item to note is that you can trade CFDs and normal shares simultaneously in your account. CFD treading is appropriate to day trading, while share trading is appropriate to buying and holding.
What to Consider When Choosing a Broker
When choosing a broker for online stock trading, there are several elements for which to account. What are the broker’s educational offerings – such as articles, videos, and Webinars? Intermediate and advanced traders will want a robust trading platform and a full suite of options-specific trading tools and resources. What is the quality of the mobile app? All these elements must be considered beyond the usual items that set online brokers apart from each other, like fees, trading platform strength, security and speed of trade execution.
Trading stocks safely and reliably depends on the platform you use. Make sure that your chosen broker has all the functions you seek. There is a lot of difference in quality between the best exchanges and the worst. Here is more information on the main elements you need to consider when choosing an online stockbroker:
In such a competitive environment, trading fees have fallen drastically over time. However, it is still possible to find a lot of variability among fee levels at different brokers. Most modern brokers have slashed their trading commissions on stocks and ETFs to $0. Be sure to keep your eye on fee levels as a new trader
You will run into fees at selected brokers even if you don't trade. A typical instance is when your account has been inactive. These so-called inactivity fees can start to bite if you have not chosen your broker well.
When you conduct a holistic assessment of your broker’s strengths and weaknesses, it is important to note important additional tools like those for education and research. Also, look out for the quality of important elements, like the trading platform and its safety and speed.
Available Stock Assets
The best stockbrokers should provide you with a wide range of stock exchanges on which to trade.
The quality and variety of these exchanges are important as many traders take a global approach and require access to bourses around the globe.
Features of the Best Trading Platforms
The best brokerage accounts for stocks should offer excellent trading platforms, educational resources, breaking news services and more. Taking into account what makes some brokers stand out from others, here are some of the features we viewed when deciding which online stock brokers were the best in the market:
Commissions and Fees
In this ultra-competitive and price-sensitive market, online stock and ETF trades should be free. It is an industry norm for investors to pay $0 commissions at most online stock brokers, and some even offer options trading free of charge, which is great news for active traders. You are advised to compare rate cards carefully as there is a wide range of fee structures among brokers.
In our research, we found that the majority of brokers charge a commission for mutual fund trading. However, that is not the end of it, as there are many hundreds of funds that trade with no commissions at all. You should carry out thorough research to understand what is on offer.
Many stockbrokers who offer ETF trading provide $0 online commissions for ETF investing, but they also offer low-cost ETFs. These types of ETFs are selected and managed by internal analysis teams at the brokerage and could give you good value if you spend time understanding them.
A well-rounded stockbrokerage account will not only offer access to investing in stocks, ETFs, and mutual funds, but also options. The top options-trading platforms tend to include $0 commissions for online options trades and high-quality trading software across online, desktop, and mobile devices.
For a newbie trader with limited capital, it can be very attractive to work with a broker who does not have account minimums. Most online stockbrokers don't stipulate account minimums, but some do. You should make sure you are comfortable with the minimums if you work with such a broker.
The best trading platforms have basic and advanced features that will suit beginner and elite traders alike. It should be clear that the broker has spent a great deal of time and effort creating a platform with useful functionality. This could be smart tools like internal analysis, complemented by Expert Adviser (EA) assistance. The more the platform is loaded with extended features and helpful tools, the better.
The broker should have taken time to create a strong research product that, among other things, gives you the latest trading news from key markets. It could provide articles that discuss important matters like inflation. Many brokers take time to invest in market summary information and a detailed economic calendar.
The quality and variety of products are important. How many stocks do they offer? The best online brokers offer you the chance to buy stocks from dozens of countries. As a rule of thumb, the broader the market access, the more serious the online broker is about exposing you to the world of online stock trading.
Traders can easily get a sense if they are in good hands. It starts with the broker’s Website, its functionality and the user experience. When you start trading, the process should be intuitive and free of glitches. In such a fast-paced environment, such as day trading in stocks, you don’t want technical issues slowing you.
The best brokers are honest about their service offerings. This includes making it easy to find declarations relating to their regulatory status, as well as the ins and outs of their service offering. Some brokers even find a way to make bad news palatable, such as stipulating services they do not offer.
As timing is key to online stock trading, you must pick a brokerage firm that is able to provide good customer support around the clock. This most notably includes the company representatives being easy to reach, fast and polite, which will in turn spare you of having to worry about problems down the road.
Best Stock Broker Mobile Apps
Mobile apps are a must-have in today’s tech-savvy world. It is normal for investors to trade at any time of day, and smartphones are as powerful as computers, meaning that traders expect to have a powerful mobile package full of the same features found in desktop trading platforms to be available in their stock trading apps.
The best mobile apps manage to pack more tools in a way that doesn’t make finding what you need overly complicated. The best mobile apps come with some of the most advanced charting packages available via mobile, with hundreds of indicators. The ability to prepare complex order types is also made easy thanks to the intelligent layout and design of a good mobile app.
Scams to Watch Out for When Trading Stocks
The complexity of investing leads many traders to engage full-service stockbrokers to manage their investment portfolios. Most investors trust their account managers to make recommendations that benefit their investment portfolio. However, stockbroker fraud occurs with worrying regularity.
In the US, the Financial Industry Regulatory Authority (FINRA) monitors US broker-dealers and their employees. In 2020, FINRA handled 5,472 complaints from investors, a marked rise from the 2,954 complaints fielded in 2019. At this point, we will remind you that the best way to steer clear of these common scams is to engage with brokers who have a long trading history and who are regulated by top-tier oversight bodies. Some of the most common forms of stockbroker fraud are described below.
Insider trading is when someone has meaningful or material information about a stock and how it might behave in the future and they pass this on to someone who acts on that information to their own benefit. One example is if there is a tip-off about a major stock selloff that might cause a major loss of value. If this is acted upon it is considered insider trading.
Theft of Client Funds
This is otherwise known as theft, pure and simple. Whenever a stockbroker steals deposits from clients' funds and deposits them into its own account, it is a misappropriation of funds. This is one of the oldest types of broker fraud that sees illicit stock brokers take payment from their clients and divert them into their own accounts rather than buying the stocks they have been instructed to buy.
Omitting Key Facts
This happens when stock brokers give you misleading or deceitful information about an investment product. This could be outright lying or omission of crucial facts where brokers “forget” to give you important information. This information is usually relevant to your decision about whether you should invest in a product or not.
Pyramid and Ponzi Schemes
Ponzi schemes are fake investments that can only continue to exist as long as there are funds from new investors to pay fake returns to earlier investors. When there are no more new investors, the scheme falls apart.
A “pump-and-dump” scheme is when a stock is built up through false claims. Often, the people behind the scheme have already bought it and will post untrue statements about the targeted stock, often on social media, claiming the company is planning to release a development, causing the stock price to jump drastically. In response, other individuals take the bait and purchase the stock, causing the price to increase. As soon as that happens, the people behind the stock dump it, leading to the new investors losing money.
Before an online broker can make trades on your behalf, you must give them permission. There are two main types of investment accounts – non-discretionary and discretionary investment accounts.
The former grants you more control over your account as your broker must have written or verbal instructions to act on your behalf before making any trades. The second type of account, discretionary accounts, gives your broker more clout as they do not need approval below a certain level to make trades on your behalf. Unauthorized trading is simply when a broker acts in your stead without you giving them permission to conduct a certain trade.
How to Start Trading Stocks Quickly and Easily
If you are a newbie, it might be daunting to join the dynamic world of trading stocks. It can certainly be dangerous to enter headlong into stock trading without learning the fundamentals. Fortunately, a good online stock broker can provide educational material and tools that will make your journey easier. Normally, this is how your journey will go:
Opening a brokerage account is fast and convenient. Users simply access the broker’s Website and click “Open account.” After reading and accepting all the terms and conditions, traders can move on to choose their account type, show their trading experience and provide the standard documentation required to get approval.
Many brokers offer a demo account. Clients can use these demo accounts to practice their strategies. The demo account normally comes with virtual funds, which should be enough for traders to get acclimated to the broker’s trading ecosystem. From there, you can fund your trading account and get started.
Who is Arincen and What Do We Do?
Put simply, Arincen is a social networking platform that brings together traders and experts to exchange expertise and ideas. Together, we evaluate the best stockbroking companies in the world while offering a compressive suite of services and tools, all in one place, either via a computer or a mobile app. The platform is so rich, one can create his own private portfolio of traders and experts he likes and, at the same time, follow their recommendations and investment sentiments.
Further, thanks to Arincen, users can keep an eye on market-price developments, as well as the latest news. Users can also benefit from the network’s educational courses on offer, to say nothing of exciting Webinars – all done in a modern and fast-paced work environment. Get all that you need in one place, not less, not more. In short. Arincen: We Meet to Simplify the Trading World.
Arincen’s Review Methodology
The team at Arincen collected more than 120 pieces of data covering in excess of 100 licensed FOREX companies. Data collection was done in three ways:
Other Websites that have ranked FOREX companies.
A survey questionnaire (referred to here as Survey “1”) we had sent to the companies invited to participate in the exercise.
We have identified 12 criteria for our assessment, each containing several aspects and carrying its own relative weight. These include licensing, deposits and withdrawals, number of assets etc.
Afterward we validated the data by:
Registering with FOREX companies as a secret shopper and/or as Arincen.
Survey number “2,” in which we asked these companies’ customers for important feedback and past experience.
The next step saw us evaluate and rank each company, relying on the hard work of 15 Arincen employees. We were very careful in ensuring the most accurate assessment possible, including taking into account different languages, as well as the various mobile-app operating systems, e.g., Apple, Samsung etc.
To add credibility to our research project, we sent a final and third survey (referred to here as Survey “3”) to enable participating FOREX companies evaluate our own research and whether it accurately reflects the realities on the ground. We were fortunate enough to receive a mark of 9.9 out of 10! We have kept to a minimum the margin of error, which stood at a measly 1%. To learn more on how we came up with the evaluation, please click here.
The Bottom Line
With ever-improving technology, trading stocks online is becoming a much more pleasant activity. Many of the top online brokers are long-established, well-regulated brokers who are always trying to improve their products and the trading experience of their clients. With intuitive and immersive platforms, admirable amounts of insightful market analysis and trading signals, clients will find a home with any of the online brokers we have recommended.
However, as we have shown, not all brokers act with the best intentions. Therefore, it falls to traders to conduct their own research before entrusting their capital with a broker. In this article, we showed you the most important factors you need to consider before selecting a broker. Be sure to conduct thorough due diligence along these lines before you decide which online stock broker to use.
Is it best to go with the cheapest broker?
Trading costs are important to active traders, and yet many brokers now offer commission-free trades of stocks and ETFs. While fees are important, other factors like the broker’s product portfolio and trading platform should also come into your thinking. There is no point selecting a broker on price alone and feeling short-changed by limited functionality.
How can I diversify without much money?
You can develop a diverse portfolio of individual stocks without much upfront money thanks to zero-commission online stock trading and fractional shares. Be sure to check that your broker offers these services as not all brokers do.
How much money do I need to start?
Many broker firms have required minimums linked to the type of investment you make. Most mutual funds have minimum investments of around $1,000, which is not cheap. However, if your broker offers fractional shares, you may be able to get going with as little as $1.
It is important to carry out thorough research before you commit to any broker as there are many different account minimum requirements in place among different brokers.
Is my money insured?
This is often the case, but only sometimes. It depends on where your broker is regulated. Brokers regulated by the FCA in the UK are protected by mandatory investor fund protection through the Financial Services Compensation Scheme (FSCS). Similarly, American brokerage firms are mandated to become members of the Securities Investor Protection Corporation (SIPC). If you choose a broker from an area with weak regulation, it is likely that you have no fallback if the broker goes bust.
How do I select the right brokerage firm for me?
Some important matters to think about when assessing a potential broker include how much money you have and the type of assets in which you wish to invest. You should also factor in your trading style and what it means for how frequently you will need to trade. Then, you need to consider other items, like account minimums, customer service levels, the availability of research materials, and more.
Are earnings from trading stocks taxable?
Yes, earnings from stocks are taxable in the same way that profits from other forms of investing, like FOREX and crypto, attract tax on profits.
How do I open an account with a stock broker?
As soon as you have clicked on the “open account” button on your broker’s Website and you comply with Know Your Customer requirements, your account will be opened, allowing you to make a funds’ transfer to the brokerage firm. This can take a few days to show up in your broker’s account. Once that is complete, you can start trading.
Adrian Ashley is a seasoned business and finance writer. With a corporate career spanning over 20years, he has developed deep experience in such diverse areas as investing, business, finance,technology and macroeconomics. He is passionate about captu...