How To Choose A Stock Trading Platform in 2019 ? (2024)

The brokerage industry was taken by a storm in the US in early October 2019.

Within a span of 2 weeks, all major brokerage firms announced the cancellation of the well coveted fees.

Now begs the question for new and veteran traders, how to pick a Stock Trading Platform.

We intend in the next few minutes to provide some guidance to help traders in the search of a new broker.

Stock Trading Platform: How To Choose ?

Let’s examine the financial impact on the brokerage firms from dropping their commissions on equities and options in early October this year.

For a stock trading platform to forego its commissions, the revenue impact is can be quite significant.

That number ranges between 6% to 32% for the big three: Charles Schwab, E*Trade and TD Ameritrade.

Judging by the market initiation reaction (see charts below) to these announcements, one cannot help wonder how these platforms will try to make it up.

It is quite interesting to me that a mere month after the sharp drop in their stocks prices ( each lost over 20% in a span of 3 days) , they all have almost fully recovered !

The three companies are trading at similar or higher prices than prior to these announcements.

By the way, that 3 day rule is absolutely to be integrated to the list of Best Trading Strategies.

So then, does the Smart Money in Wall Street know something that the rest of us are not aware of as we shall remain in the Dark as usual ?

Time will tell.

For the time being, let’s figure out how to navigate the field of online brokerage firms.

Stock Trading Platform: What To Expect

One thing we know is that these companies clearly have other ways to generate revenue from our trading activities.

One of the most obvious one is the interest on the Cash Balance on our account.

Yes, it is just as legal as what happens with the Cash we have in the banks not doing much for us but helping the banks increase their own cash flow sheets.

They often turn around and charge heavy monthly fees for account maintenance.

Back to our brokerage firms : if not interest rates from our Cash Balances, they can use their clients’ stocks to lend to other traders who partake in Short Selling.

It is again completely legal in US markets.

The third way for online stock trading platforms do benefit from their customers is by trading against them ! Most of them are the market makers.

Therefore, they control quite a bit of the activity of the market.

They know how many positions are open on any given stock and thus can take actions that are beneficial to them alone.

I alluded to this in this piece awhile back how this obvious conflict of interest does not seem to bring closer attention to such a practice.

Get More Out of your Stock Trading Platform

Before you sign up for any online stock trading platform from this point on, the best piece of advice I can give you is to compare them.

You will be using the list of features below to rank through this fair process.

That way, you will be certain that your choice matches your current needs.

Nothing precludes you at any time from switching when you find yourself wanting to enter different types of markets.

Here is in order of importance according to my experience, the must have items when choosing your trading platform.

1. The platform must allow options trading
2. The platform must have a Robust Mobile version typically an App
3. It must offer free Web based Education especially if you want to know how to learn options trading options
4. Inquire about to the ability to simulate Option Trading Strategies
5. How early do they give access to Pre-market ?

There are other items such as s Foreign markets, Futures or Cryptocurrencies that will really depend on each trader appetite.

I did not forget the need for a good Charting Tool like the one we recently reviewed here.

Is Your Platform Holding You Back

Once you become a customer and establish a trading pattern, I suggest you call the customer service to negotiate

a reduction on your fees per contract if you are like many of us who trade stocks options very frequently.

A stock trading platform will never call you up to say: “Look, we see that you have been spending a lot of money with us and for that, we are offering you a reduction on these fees”.

These fees could (still can) accumulate to the point of eating up your Profits.

It is up to you the trader to use this as a bargaining argument in the negotiations.

Some of them typically will meet you half-way at least if you start really low.

The reason for this is because the cost of bringing in a new customer is much higher than the revenue the will be forfeiting from your higher fees.

A few years back, I was able to get a price of 35 cents per stock option contract with one the big three I mentioned above by simply using that technique.

I still enjoy that price today even though the general public was paying almost twice as much until the recent announcements in early October.

Conclusion

We shared that the brokerage industry has become more competitive than ever before.

Some are even predicting that some consolidations are bound to happen in order for them to survive long term.

Just like it happens in real Estate from time to time, the trading market is now a trader’s market.

Next, I am going to apply these guidelines and reveal to you my Top 5 Best Stock Trading platforms.

I hope you have enjoyed this article. Please do leave your thoughts in the comments section.

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