Brokers For Trading Stocks On Line - What Do Brokers Charge For Trading Stock?
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If you are looking for a cheap online trading broker, you need to have a clear understanding of the cost structure for each one. This involves much more than just their commissions and fees per trade. There are several ways to incur charges with them, so you must look at all of them in order to determine which one is the cheapest.
Here are the factors you should look at to evaluate the cost of an online trading broker:
Commission Per Trade This is the most important factor and will likely account for most of the charges against your account. For most brokers, though, there is not a flat rate.
It may vary depending on one or more of the following:
- Volume of shares traded - You may have one fee for up to a specified number of trades per month, then a different fee for trades after that. Others have tiered pricing, where the commission rate changes the more trades you make. So if you only trade a few stocks per month, you’ll pay more on a per-trade basis.
- Upcharge for certain kinds of stock trades - several brokers have an upcharge, usually for low-cost stocks (below $2.00 per share, for example) or those traded on a certain kind of exchange (pink sheets, for example)
- Number of shares traded - Some premium brokers will charge more for a trade of a large number of shares.
- Account Balance - this is like a checking account, where you get charged lower fees if you have a high account balance. Smaller account balances are charged more.
- Phone Trades - Online brokers offer the option to phone in a trade and talk to a live broker, but there is a higher commission rate for these transactions.
Account Minimums - While this is not an out-of-pocket cost exactly, it is very important for deciding which broker you want to go with. Some brokers have no account minimum, so if you want to deposit only $100, you can do that. Another may have a minimum of $3,000. So you would have to deposit that amount just to open the account. While it is still your money, you may not want to deposit that much to get started.
Maintenance Fees - Some online brokers charge monthly or quarterly maintenance fees. Often, these are waived if you have a high account balance.
Cancellation Fees - Most charge an account cancellation fee. Hopefully, you won’t need to use this anytime soon, but it is good to know what it is if you do want to cancel.
Especially for beginning online traders, picking a cheap online trading broker is a top priority. In the early stages, you will likely start out by placing smaller trades. So your commissions will be more on a percentage basis and can drag down your profits if you aren’t careful.
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