Should You Choose A Discount Broker?

A Discount Broker is the most popular choice among active traders and is also appealing to certain types of longer term investors. So the answer to the question would depend on what each individual person is looking for as far as available options and at what price.

The initial choice you have to make is whether you would like to have a hands on approach to your trading and investing, or if you would like to pick up the phone and have someone help make your decisions for you and let them place and possibly monitor your trades.

If you want to have a hands on approach, then a Discount Broker may be the right choice for you. Keep in mind that many of them are frequently adding more functions and benefits for their customers to keep them from going elsewhere, including to Full Service Brokers.

Typically a discount online brokerage firm offers low cost commissions with some basic functions that are included with all accounts. Most have additional options available once you reach a certain number of trades over a specific time period and/or if you have a certain amount of money in accounts with them. Some of these upgraded options are available for free once you reach these levels, and some are at additional costs.

Some typical upgraded options that are available are:

  • Lower Commission Levels based on the number of trades you make
  • Advanced Charting capabilities
  • Streaming Level II Quotes
  • Nasdaq TotalView
  • Time and Sales Data
  • Multiple Trading Platforms
  • Better access to a live person to execute trades
  • Strategy Design and Back Testing capabilities
  • Trade Automation
  • Advanced Order Types
  • Directed Trading
  • Access to advanced research

These are just some of the possible options that are available. As I said above, sometimes these are included at no additional cost while other times there are fees for certain functions.

One of the things I mention on my Brokers page is to pay close attention to and consider the commissions that each firm charges. If you start, or are, making a large number of trades, the amount of your commissions at the end of the year can make a significant difference between choosing a Discount or a Full Service Broker.

Before making your decision, you should take all of these things into consideration. It is much better if you can think about these ahead of time, rather than wait until the end of the year, or years, and realize that you have spent thousands of dollars in commissions that you could have saved. Again though, it all depends on how much of a hands on approach you would like to keep.

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