Choosing Your Broker

In the new age of low commissions, low fees, and brokers being run by machines over man, choosing your which broker you use depends a lot on your goals.  Our goal at 2KHedgeFund is to bring investment control to the individual trader.  With that in mind I will run over a few broker options that deliver cheap commissions, user friendly platform, low or no minimum balance, and overall best experience.  While I won’t specifically rate each one as my use of them might differ from others, I will give the pros and the cons of each and let you decide which to go with.

Options House (By ETrade):

SOURCE : http://www.optionstrading.org/images/optionshouse-logo.png

This was the very first options account that I used and I recommend it.  Great customer service, recently bought out by E Trade, low commissions, no minimum balance, and a great platform.  For equity trades OH offers $4.95 flat commission fee and for options they charge the flat commissions with $0.50 per contract.  Their platform is excellent, offering a great options trading platform that can show you “what-if” scenarios that can occur depending on underlying price and days to expiration.  Their platform has a great alert system and conveniently browser based, so accessible on any computer at any time.  Some of their downfalls though include a low grade mobile platform.  Trading from your phone is a pain in the ass and will make you want to avoid it, but like I said they have the browser platform that works amazing.  For more sophisticated traders, OH does not offer ForEX trading, limited commission free ETFs, and no fee free mutual funds.  Investors that solely trade stock and options, more so options, OH is a great choice.  Sophisticated investors seeking other means of investing should look elsewhere.  NOTE: This is moving to E Trade though later this summer, so things might change with what they offer, prices, and platform.

 

RobinHood:

SOURCE: https://techcrunch.com/2014/09/23/robinhood-stock-app/

If you are brand new to investing, have never bought an equity before, or want to begin taking control of an individual investment account, Robinhood is a great choice.  Although this is accessible only on the phone app (there are ways to get the platform running on a computer but it takes work), it is still worth getting.  I will start with the downsides because they are prominent but often worth dealing with.  Lag.  At the open to each trading day there is often lag associated with sending trade requests out as the servers get a massive number requests.  It can cause Robinhood to crash (although rarely happens), but chances are it might take a few extra seconds for your order to go through which if trading 3x leveraged ETFs can be a costly arbitrage.  RH also is terrible on access to IPOs, but there is a way around that by connecting your account to stocktwits and trading through stocktwits commands.  This broker also has terrible customer service; just ask anyone who has tried to contact the company.  It takes hours to get through to a representative since the company is so small.   There are no options, forex, or short selling allowed on the RH platform currently, but they are supposedly working on adding these things in over time.  Along with terrible charting and an ugly android platform (the iPhone app is much more aesthetic), there are issues around accuracy of the extra information they provide such as the yield of dividend, P/E, market cap, and earnings.  For the down falls there are positives though.  $0 commission fees draw investors from every level of experience.  The ability to jump in and out of a stock hundreds of times a day, saving thousands of dollars a week draws the attention of day traders, while the no minimum and no commissions draw new investors to want to put $200 in an account and buy a few stocks and watch them to get an idea on how the market functions.  RH also allows you to listen in on earnings calls right from your phone through the app.  The app can also link directly to your stocktwits account, allowing you to share verified trades and show others your success.  RH also has a great tool for beginners, Pattern Day Trading Protection.  If your account has under $25,000 and you complete 4 or more day trades in a 5 day rolling span, your account will be prohibited from making any day trades for a 90 day time period.  Being a new trader it is often easy to forget how many day trades you have done in the week, so having the protection will prevent you from making the 4th day trade and putting you into the trade restriction.  This company also provides a monthly fee service called “Robinhood Gold”, which allows pre market and afterhours trading (9 AM to 6 PM), and margin access to extra capital for trading leverage.  I would recommend any new investor to try RobinHood first before other brokers if they have never traded equities before and are only interesting in investing or trading stocks. 

Here is my referral code if you are interested in signing up and receiving a free stock share -http://share.robinhood.com/collinb44 

 

TD Ameritrade:

SOURCE: https://investorjunkie.com/6233/td-ameritrade-review/

This is a very diverse broker service that offers everything you could want in investing.  Stocks, options, futures, commodities, mutual funds, forex, and a free research trading platforms are all offered at TD.  With $0 minimum account balance and a commission rate of $6.95 per trade and an additional $0.70 per contract, TD is considered a discount broker that provides professional services.  The greatest part of TD though and its most notorious platform is Think-Or-Swim.  I won’t go into details about it but it is one of the most used platforms for research by individual traders.  You can even open an account with no balance, let it sit with no money since there are no activity fees for TD, and use the TOS platform while trading on your RobinHood account.  They offer 4,000 no fee mutual funds, over 100 commission-free ETFs, free research data that is on a professional level, and 24/7 customer service by both phone and email.  If you have the money to cover commissions without it hurting your bank, and skill to trade using the TOS platform I would recommend TD.  If you have limited capital but want to use the TOS platform, open an account and utilize the no minimum balance to gain access to the free TOS platform.  If you want to trade options though a $2000 minimum balance is required for margin access.  TD has 2 other trading platforms that you can explore if you open an account, but most likely you will use TOS.  This is an ideal broker that covers all the bases at a low cost.

 

Tasty Works:

SOURCE:  https://www.reddit.com/r/options/comments/5ioqk5/has_anyone_received_and_email_from_tastyworks/

The new kid on the block brought to you by the makers of Think or Swim platform, Tasty Works is curtailed to fit the options trader.  Keeping ease of use in mind when creating their platform, maintaining a low commission rate, and providing vast option trading information, Tasty Works is another excellent choice.  Offering free education on option trading strategy via their YouTube channel Tasty Trade, this group has the best interest of its users in mind.  They have implemented a $0 commission closing cost to all trades and a fee structure of $1.00 per contract, $5.00 opening cost for unlimited shares, and $2.50 for futures contracts.  This is more competitive than OH and the other brokers on pricing, but not as attractive as RobinHood’s $0 commission.  Offering a browser, mobile, and desktop platform, you are able to trade anywhere at any time.  Fortunately this mobile platform is user friendly and aesthetic, allowing you to trade easily. 

Here is my referral link if you would like to begin trading with Tasty Works –

https://start.tastyworks.com#/login?referralCode=MFQHKQ86AE

 

Other Notable Brokers Worth Looking Into:

Interactive Brokers

Charles Schwab

Vanguard

Fidelity