Brokers for Active Traders

Interactive Brokers best for those who trade frequently

Most online brokers promise potential customers sophisticated trading, analysis and research tools, but only a few really excel in this area. Those that do offer investors customizable platforms, advanced charting and research services, dynamic streaming quotes, tools for risk management and the ability to place orders that go directly to the market. Most also allow access to foreign markets, and they offer a wide range of investment products. Among these brokers, Interactive Brokers (IB) stands out for both its technology and its low costs. The 2012 Barron's review ranks IB No. 1 out of 27 brokers, names it one of the four lowest-cost brokers for both occasional and frequent traders, and picks it as the best broker for international traders and the second best for frequent traders.

IB receives three 2011 Reader's Choice awards from Technical Analysis of Stocks & Commodities: best stock brokerage, best futures brokerage and best foreign exchange brokerage. Meanwhile, the publication Wall Street Letter, making its first awards in 2012, picks IB as the best broker for options and gives it an award for "best use of technology by a broker." Barron's does warn, however, that "this is not a broker for the casual buy-and-hold investor."

The minimums to open an account are $10,000 for a "universal" account, $5,000 for IRAs and $3,000 for those under age 21. Account holders are required to spend at least $10 monthly in commissions and market data fees; otherwise they are assessed an activity fee of the difference between the amount spent and $10. For trades of U.S. stock, the commission rate is $0.005 per share, with a $1 minimum and a maximum of 5 percent of the stock value.

TradeStation

TradeStation excels in many of the same categories as Interactive Brokers, though its costs are not as low. It was ranked No. 1 in last year's Barron's review, but this year's review ranks TradeStation fourth. According to editors, TradeStation fell in the rankings because "its mobile apps fell a little short of others' efforts." At the same time, the review praises the firm's "major enhancements to education offerings and dazzling options analytical tools," noting that "user requests from TradeStation's very active social network were the inspiration for the major product and service enhancements of the last year."

Subscribers to Technical Analysis of Stocks & Commodities pick TradeStation the first runner-up for Reader's Choice awards for best stock brokerage, best futures brokerage and best forex (foreign currency trading) brokerage. And for the second year in a row, TradeStation wins Reader's Choice awards for best institutional, professional and online analytical platforms.

However, as the Barron's review explains, TradeStation is not for everyone -- its average customer makes 640 trades per year. Both per-trade (*Est. $6.99 to $9.99 per trade, depending on trading activity) and per-share-lot (*Est. $1 per 100 shares to $8 per 1000 shares) commission schedules are offered. The account minimum is $5,000 for those who aren't day traders. TradeStation is software-based, offering no browser-based access to accounts. Those who don't trade the equivalent of 5,000 shares of stock or 50 options contracts per month pay a $99.95 monthly fee to use the software platform.