A common question among new traders is “Which broker should I use?” I firmly believe that the choice of broker is a very individual one, and that what is right for one person may not be right to somebody else. So I’m always hesitant about making suggestions for broker accounts. However, I do understand that choosing any broker, particularly your first, can be a daunting task.

I’d have to be a licensed financial adviser to make broker recommendations, so I’m not going to do that here. However, I can present to you a selection of brokers that I myself would use in varying circumstances. So let’s have a look at what’s out there.

Beginner

If I was just starting out trading, and looking for my very first broker, I would be looking for something low-cost, simple to set up, and with good support. If my funds were limited I would want someone who would accept a relatively small initial deposit.

A deposit of under $25,000 does of course mean that the account would be subject to the pattern day trader (PDT) rules. There are ways around these rules, but this article is about choosing regular brokers, not umbrella or derivative accounts.

I actually believe that when starting out with a small balance and a regular broker, these rules are no bad thing. Being restricted to three live trades per week forces the beginning trader to really think about each trade they take; it’s a great way to avoid overtrading - one of the biggest mistakes new traders make when they start out.

A broker meets all of the above criteria is Zecco. Accounts there can be opened with as little as $2500, and commissions for the first 10 trades each month are actually free. If you are abiding by the PDT rules, that effectively means free trading. Beyond those 10 trades, Zecco have a fixed price regardless of how many shares you trade. This price is quite high for quantities of 500 or less (although less than many other brokers), but becomes very competitive above 500 shares.

Accounts can be opened on line, and all the software is web based meaning that it is very easy to get started trading. More experienced traders however, may find the web-based software a little slow or limiting.

Zecco has a reasonable community section with forums and blogs, which provide support to new traders, although personally I am always wary of forums as they can be a big distraction. Finally, there is also a useful stock screener. You probably already know that I am not particularly a fan of screeners and scanners, but they do have their uses, particularly when trading in the afternoon session.

Intermediate

If I had some experience behind me, I would be looking for a broker who offered a little more flexibility, but still great back end support. A broker like TradeKing would fit the bill. As a fully regulated broker, they’re protected to $25 million, which would be important to me as I would be increasing my account size. TradeKing is only available to US residents.

Advanced

There is no clear line between beginner and intermediate levels, more a kind of grey area. However, advanced level trading demands a step up from what the web-based brokers can offer.

With a large fully funded account, some good experience behind me, and higher daily volume of trades, I would be looking for a broker who offered very fast flexible trading software, and a large selection on the list of shortable stocks.

Interactive Brokers fits the bill here. Their trading software is very flexible indeed, and as it runs natively on your computer, offers an advantage in the speed of execution. The downside is that the learning curve is pretty steep. You need a good understanding of the market and your strategy before getting involved in configuring the software to work how you want it to work.

Interactive Brokers always has very competitive commissions, but these come at a price - and that price is customer support. There is nothing particularly wrong with their support, and you will always be able to talk to somebody about your account, but they will have less time to help you with software problems or getting set up. In other words, don’t expect 5 start service for “newbie” questions!

General Advice

As I said earlier, choosing a broker is really a personal decision. You should take many factors into account, including your level of experience and therefore the amount of help you’ll need getting going. You should also consider your location - some brokers won’t take customers from some countries.

When choosing a broker, take the time to look around at who’s out there, and what they offer. Can you close trades by telephone if there is a software problem? Are they insured? Does their software make sense?

Many offer demos or trial accounts for free, and these are certainly worth checking out. It’s also worth calling their customer support folks, before you become a customer. How do they treat you? Are they helpful and knowledgeable? If you can’t get good service before you’re signed up, you probably can’t expect much afterwards!

Finally, consider having more than one account. This is less important when you’re starting out, but if you make your living from trading, it’s important to reduce “single points of failure”, and a broker is one such point. If for any reason you lose access to your broker account, having a back-up means you can keep earning.