Choosing the right broker is one of the most important decisions you will make as a new trader. Your broker is your gateway to the markets, and the wrong choice can cost you money through fees, poor execution, or limited features. This guide will help you understand what to look for and how to make the best choice for your trading needs.
What is a Stock Broker?
A stock broker is a company that executes buy and sell orders on your behalf. In the past, you needed to call a broker on the phone to place trades. Today, online brokers let you trade from your computer or phone with just a few clicks.
Important distinction: A broker is different from a financial advisor. Brokers execute your trades. Advisors give you investment advice. Some companies offer both services, but as a self-directed trader, you typically only need brokerage services.
Types of Brokers
Understanding the different types of brokers helps you narrow down your options:
Full-Service Brokers
These brokers offer personalized advice, research, and portfolio management. They charge higher fees but provide more hand-holding. Examples include Morgan Stanley and Merrill Lynch. Best for investors who want professional guidance.
Discount Brokers
These brokers offer lower fees and let you make your own trading decisions. They provide basic research tools and educational resources. Examples include Fidelity, Charles Schwab, and TD Ameritrade. Best for self-directed traders and investors.
Mobile-First Brokers
These newer brokers focus on simple mobile apps and commission-free trading. Examples include Robinhood, Webull, and SoFi. Best for beginners who want a simple interface and low costs.
Key Factors to Consider
1. Fees and Commissions
Most major brokers now offer commission-free stock and ETF trades. However, you should still understand all potential costs:
- Options fees: Many brokers charge per-contract fees for options trades (typically $0.50-$0.65 per contract)
- Margin rates: Interest charged when borrowing money to trade
- Account fees: Some brokers charge annual fees or inactivity fees
- Transfer fees: Costs to move your account to another broker
- Foreign stock fees: Extra charges for trading international stocks
Fee Comparison Example
Trader A makes 100 options trades per month (1 contract each).
Broker 1: $0.65 per contract = $65/month = $780/year
Broker 2: $0.50 per contract = $50/month = $600/year
Annual savings by choosing Broker 2: $180
2. Trading Platform
Your trading platform is where you will spend most of your time. Consider these features:
- Ease of use: Can you place orders quickly and easily?
- Charting tools: Does it have the technical indicators you need?
- Mobile app: Can you trade effectively from your phone?
- Speed: Does the platform lag during high-volume periods?
- Customization: Can you set up the workspace to fit your needs?
3. Research and Education
As a beginner, access to quality research and education is valuable:
- Stock screeners to find trading opportunities
- Analyst ratings and price targets
- Educational articles and videos
- Webinars and live training sessions
- Paper trading accounts to practice
4. Account Types
Make sure the broker offers the account types you need:
- Individual brokerage: Standard taxable account for trading
- IRA accounts: Retirement accounts with tax advantages
- Margin account: Allows borrowing money and short selling
- Joint accounts: Shared accounts with a spouse or partner
5. Customer Support
When something goes wrong, you want help fast. Evaluate:
- Phone support availability (24/7 vs business hours)
- Live chat options
- Response time for email inquiries
- Quality of help documentation
- Local branch availability (if important to you)
6. Security and Regulation
Your broker should be properly regulated and insured:
- SIPC insurance protects up to $500,000 (including $250,000 cash)
- SEC and FINRA registration
- Two-factor authentication for account access
- Fraud protection policies
Safety tip: Only use brokers registered with FINRA. You can verify registration at brokercheck.finra.org. Never send money to unregistered platforms.
Popular Brokers Compared
Fidelity
Best for overall value. Excellent research, strong customer service, and no account minimums. Good for beginners and experienced traders alike.
Charles Schwab (including TD Ameritrade)
Best for education and trading tools. The thinkorswim platform is powerful for active traders. Great educational content for beginners.
Interactive Brokers
Best for advanced traders. Lowest margin rates and access to global markets. The platform has a steep learning curve.
Robinhood
Best for simplicity. Clean mobile app and easy to use. Limited features compared to traditional brokers.
E*TRADE
Best for options traders. Power E*TRADE platform has excellent options tools. Good mobile app and research.
Questions to Ask Before Opening an Account
- What are all the fees I might pay?
- Is there a minimum account balance?
- How quickly can I access deposited funds?
- What happens if I want to transfer my account later?
- Is there a paper trading option to practice?
- What customer support options are available?
Switching Brokers Later
If you choose a broker and later want to switch, you have options:
- ACATS transfer: Move your entire account to a new broker (usually takes 5-7 business days)
- Partial transfer: Move only specific positions
- Liquidate and move cash: Sell everything and transfer the cash
Many brokers will reimburse transfer fees from your old broker if you ask.
Track Your Trades Across Any Broker
Pro Trader Dashboard works with all major brokers. Import your trades automatically and see your true performance with detailed analytics.
Summary
Choosing a broker comes down to your specific needs. Consider your trading style, the fees you will pay, the platform features you need, and the quality of customer support. Most major brokers offer commission-free stock trades, so focus on the other factors that matter to you.
Start with a broker that fits your current needs, but remember you can always switch later as your trading evolves. The most important thing is to get started with a reputable, regulated broker.
Ready to open your account? Check out our guide on opening a brokerage account or learn about funding your trading account.