Best Stock Brokers List And Online Stock Trading Platform
Online stock brokers enable traders to trade stocks from their computers at their convenience. Instead of the conventional method of trading stocks, traders can browse and trade stocks of major global brands with a single click.
There has been an emergence of online stock brokers over the last couple of years. It can be quite difficult to choose the broker that best suits the needs of traders.
Here at Option Invest, we have tested and reviewed the best online stock brokers. There are a couple of factors that goes into choosing the most appropriate broker for you.
In our stock broker comparison table, you will find handpicked brokers that will facilitate your stock trading and make it a pleasurable experience for you.
We will also discuss regarding stocks and stock trading in general. We understand not all traders are professionals and there are novices who look for guidance and help regarding trading.
Along with the broker comparison table, you will find useful information regarding stock trading for beginners. Firstly, let us understand about stock trading.
|Broker||Min Account||Pricing||Features||Special Features|
Virtual Trading: Yes
US Trader: No
|Up to 20:1 leverage. 100+ stock assets. Major exchanges: NYSE, NASDAQ, FTSE & more.||Free Account Read Review|
Mobile Trading: Yes
Virtual Trading: Yes
US Trader: No
|Stock Assets: 187||Free Account Read Review|
|-||No||Speculation on market uptrends/ downtrends. Suits both short and long-term strategies. NO extra fees apply.||Free Account Read Review|
Virtual Trading: Yes
US Trader: No
|Leverage up to 1:600 for professional clients. For new traders 50% commission discount.||Free Account Read Review|
What Are Stocks?
To explain in simple terms, stock is a share in the ownership of a company that can be owned. When you own a stock, you can have a claim on the company’s assets and profits.
You can own multiple stocks to increase your ownership stake. Stocks are also referred to as shares, equity, etc.
When you own a company’s stock, you can proclaim yourself as a shareholder of that company.
Keep in mind that you when you own a stock, you do not own the company, you own the share issued by that company. Don’t get confused between the two.
Along with the ownership benefits, you are also entitled to any voting rights associated with the stocks you own.
This doesn’t mean you can engage in decision making for the company. Neither can you assert your opinion on how the corporation should be run.
You cannot contact the owner of the company and expect him to operate the company based on your wishes.
The relation between the shareholders and the management of the company is that of the principal-agent.
The main task of management is to increase profits and value of the company. If they can’t achieve that, then the shareholders can vote to remove the existing management.
Not all shareholders have the same level of influence and power. It is often the business giants and conglomerates that have this kind of voting power.
Conventional stock trading meant a stock certificate was a paper proof of your ownership. Now, with the advent of online brokers, there is no need of such physical certificates.
The online brokers keep this information digitally stored on their server electronically. Selling a stock previously also meant taking the stock certificate to the brokerage.
Now, stocks can be traded with the single click of a button. This convenience has taken trading to new heights.
What Is Stock Trading?
Stock trading is simply the act of buying and selling of company stocks. The stock market is the place where the transaction of stocks happens.
Most of the trading takes place in stock exchanges. However, only registered participants trade here so majority of the rest of the traders trade through a stock broker.
The purpose of stock trading is to make money. When traders deal about trading stock, it means that they bought or sold shares of a company.
This share price is never fixed. The stock market is driven by the supply and demand just like any other market.
If there are more buyers than sellers of a stock, its price moves up. The opposite happens when there are more sellers than buyers.
Another big factor that comes into play is the market news. It plays a big role in determining the price movement of that share.
If the news is positive, it will most likely result in an increase in the share price and vice-versa.
One thing not to be confused with is that company value does not directly correlate with the stock price of that company.
Comparing the share price of two companies does not equate to anything meaningful.
One thing to keep in mind is that the term stock trading can be misleading since you do not trade one stock for another.
In stock trading, you are buying and selling stocks in the stock market. The stock market is comprised of two markets: primary and secondary market.
Primary market is where company’s shares are offered in an open stock market. Here the shares of the company are offered for the first time.
The secondary market, there is transaction of shares by investors and not the company itself. The company that issued these shares no longer participates in the secondary market.
Other than these two, there is also an OTC (Over The Counter) Market where stock trading takes place in a decentralized market.
In a decentralized market, there is no central authority or body governing these trades. It is usually done between a trader and a broker.
The transactions in the decentralized market takes place electronically instead of trading via a stock exchange.
Here are the biggest stock exchanges on the basis of market capitalization:
NYSE: New York Stock Exchange is located in the US with a market cap of $22.9 trillion
NASDAQ: NASDAQ is an American stock exchange with a market cap of $10.8 trillion
Tokyo Stock Exchange: With over 2300 listed companies, Tokyo Stock exchange has a market cap of $5.67 trillion.
Shanghai Stock Exchange: The Chinese stock exchange has a market cap of $4.02 trillion
Hong Kong Stock Exchange: With over 2000 listed companies, this exchange has a market cap of $182 billion.
Our focus is on giving you a competitive list of stock brokers and hence, we will explore more on stock brokers.
What Are Stock Brokers?
Stock brokers execute stock trade orders on behalf of investors (individuals and companies). In exchange, these brokers receive a fee/commission for their services.
This fee is flat and is a percentage of the transaction cost. Think of a stock broker like a middleman who places order on your behalf.
There are three kinds of stock brokers:
- Full-service brokers
- Discount brokers
- Online brokers
Full service broker: As the name suggests, they offer full or complete broker service to their clients. These brokers also charge higher fees and commissions.
They offer multiple financial services and have a wide assortment of investment solutions. They have their own panel of trading analysts, experts, and access to IPO’s (Initial Public Offering).
These brokers have their own offices and you have the option of calling the broker directly to place trades or you can place trades via mobile or online platforms.
These full service brokers cater their service towards long-term investors and less towards day traders and swing traders.
Discount brokers: Discount brokers have smaller commissions compared to full service brokers. Discount brokers charge somewhere between $5 to $10 per trade.
These brokers have trading tools and services that are geared towards swing traders and day traders.
Online brokers: Online brokers deal directly with clients with very small commissions. The main benefit of these brokers is the instant execution and accessibility.
These brokers don’t have any physical offices and instead they deal online for all your needs.
Trading Stocks as CFDs
When you purchase stocks from these brokers, you own them. What if you don’t want to own these stocks but at the same time wanted to speculate on their price movement?
The solution is to trade stock CFDs instead of trading regular stocks. CFDs stand for contract for difference which is a contract that is formed between the buyer and the seller.
With CFDs, you don’t own the underlying assets and hence don’t enjoy any ownership benefits. There are no expiry dates on CFDs. Your position lasts as long as you desire but it carries an overnight fee.
When you open a position, you have the option of going either long or short. If you think the price of the asset will increase, you will long, i.e. open a buy position.
On the contrary, you go short when you anticipate a drop in price and thus sell your underlying asset.
When you close your position, you exchange the difference between the opening and closing price. The difference might be positive (profit) or negative (loss).
The different fees associated with CFDs include spreads, commissions (only applicable to stocks), and financing costs.
One advantage of trading CFDs is you are not liable to pay stamp duty as there is no ownership involved.
There are more advantages of trading stocks as CFDs compared to conventional stock trading such as margin and leverage.
Marginal trading allows you to borrow money from your broker to open your position. This allows you open large positions using small investments.
This increasing buying power that is available to margin traders is known as leverage. It is expressed as a ratio.
For example, you wish to go long on Barclay stock. Each stock has a buy price of $160. If you bought conventional stocks, you would have paid the full price.
But with CFD stocks, you just need to pay a marginal amount. This amount is determined by the margin rate and leverage ratio.
Suppose the margin rate was 10% that means you’d only have to pay $16 to purchase one unit of Barclay stock.
This allows you to open larger positions that would not have been possible using your funds alone.
This however, carries a great deal of risk and leverage is aptly termed as a “double edged sword”.
If you incorrectly predict the price movement, you will lose more than what you invested. So for beginner traders, we would advise to keep the leverage low or to avoid it altogether if possible.
These are the basics on how CFD trading works. We have in-depth articles that describe CFD trading in great detail. Make sure to check them to get a better understanding of CFDs.
CFD Stock Brokers
To trade stock CFDs, you will need a broker that provides CFD trading and has stock CFDs under their asset portfolio.
Choosing an online CFD broker can be a confusing task for many traders due to the sheer number of brokers out there.
We have reduced this headache for newbie traders and scanned and sorted out the best performing brokers.
Our criteria of broker selection depended on a few factors. This includes regulation, trading platform offered, minimum deposit, asset index, trading accounts, payment options, withdrawals and deposits, educational tools, customer support, and much more.
We would recommend new traders to start with trading with a CFD demo account. A demo account will allow you to practice trading without any consequence of risks.
The trading environment in a demo account mimics that of the real account but the money used in a demo account is virtual.
This means you can trade without the fear of losing any actual money thus allowing you to eliminate the impact of emotions in trading.
You can try out different strategies and find out what works best for you. One thing to note about stock trading is that it is less volatile than forex and crypto assets.
Hence, the trades are long-term and you have time to perform technical and fundamental analysis.
That being said, stock trading is not easy and you need to keep a tab on several factors that affect the price of the asset price.
You need to take a close look at the company’s financial reports, earnings report, track all internal developments.
You will also need to monitor the economic and financial events happening around the globe. Even things like interest and inflation rates have an impact on the asset price.
A relatively new factor that comes into play is the hype created by the social media that causes either a sharp gain in price or a rapid fall in a short period of time.
Even individuals can affect the stock market immensely. Stock market legends such as Warren Buffet or George Soros can single handedly move markets with statements.
Online stock trading is slowly becoming the preferred way of trading stocks.
You can speculate on the prices of stocks belonging to different companies without owning the underlying asset. This also means you are devoid of any ownership benefits.
To trade stocks online, you need a stock broker. There are three types of stock brokers: full service, discount, and online brokers. Each of these are different in the type of service they provide.
Trading stocks as CFDs is allows you to enjoy leverage trading. By paying a small margin upfront, your broker will cover rest of the cost of the trade. In this way, you trade large positions using a small amount of deposit.
In our broker comparison table, you will find a list of stock brokers. We have extensively tested these brokers on the basis of various features so you get the best stock trading experience.
Our stock trading guides will give an clear idea on how to profitably trade stocks for beginners.