Brokers for Active Traders

Best online brokers for those who trade frequently

Most online brokers compete to offer potential customers sophisticated trading, analysis and research tools, but a few really excel in this area. Those that do offer investors customizable platforms, cutting-edge 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 2010 Barron's review names it one of the three lowest-cost brokers for both occasional and frequent traders, and ranks the firm third overall out of 22 brokers.

IB is also chosen by subscribers to Technical Analysis of Stocks & Commodities to receive three 2010 Reader's Choice Awards: best stock brokerage, best futures brokerage and best foreign exchange brokerage. IB offers access to "over 90 markets worldwide," according to its website, and Barron's picks it as the best broker for international traders. The Barron's review also lists IB as one of the three best brokers for frequent traders. The one downside, editors at Barron's say, is that the IB trading platform is not easy to learn. 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.

Another broker geared toward active traders, ThinkOrSwim, also stands out among its peers. For the second year in a row, this broker is ranked first in Barron's annual review. ThinkOrSwim was bought out by TD Ameritrade in 2009, and the review acknowledges that "last year, we worried about the pace of innovation following the firm's takeover by TD Ameritrade." However, reviewer Theresa W. Carey writes that ThinkOrSwim's president "put those fears to rest" when he reported that ThinkOrSwim and TD Ameritrade will continue to operate separately. ThinkOrSwim offers investors access to the market via free downloadable software, a web-based application, and several mobile applications. All are rated highly for ease of use.

Reasonable costs and what Barron's terms "great customer service and a wide array of educational offerings" add to ThinkOrSwim's appeal to young investors. The cutting edge trade analysis tools it offers are another plus for frequent traders. The only area in which ThinkOrSwim doesn't stand out is access to foreign markets, reviewers say. Flat-rate stock trade commissions are $9.95, or $.015 per share with a $5 minimum, regardless of how many trades you make. Options are priced at 95 cents to $2.95 per contract, depending on the rate plan you choose. It takes $3,500 to open an account with ThinkOrSwim, and the first three mutual fund trades each month are free.

According to the 2010 Barron's review, TradeStation is "the go-to broker for those who develop their own trading systems," because of the sophisticated trade modeling and analysis tools it offers. However, as the review explains, this online broker is not for everyone -- the average TradeStation customer makes 640 trades per year. TradeStation is software-based, offering no browser-based access to accounts. It's also not inexpensive, except for heavy traders. Those who don't make a certain number of equities, futures, options, and forex (foreign exchange) trades per month pay $99.95 each month to use the software platform. The account minimum is $5,000 for those who aren't day traders. 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

TradeStation wins 2010 Readers' Choice Awards from subscribers to Technical Analysis of Stocks & Commodities for having the best trading system for stocks, futures and options, and for the best institutional, professional and online analytical platforms. Management is responsive to the needs of customers: Enhancements to the trading platform are made based on suggestions from the traders in TradeStation's online community.