Whatever happens on a stock exchange and no matter how much influence computers, algorithms and high frequency trading may have, human nature will always have an important role to play. Typically, human nature becomes more important when momentum is changing and there is excitement or panic in the air. It would seem wise to try and understand this mass psychology or group thinking which is often referred to by investors as the madness of crowds.
The IBRK Lite plan enables affordable investing with no commissions and no account minimums on its stocks and ETFs. Its Pro plan is for the regular investor, with specific fees based on your investment activity. Research and education are impressive, with its Traders’ Academy offering free courses and several applications designed to help you make better investments.
All of these factors must be considered before choosing an online broker. Do you want to trade or invest? Do you want a great mobile app to check your portfolio wherever you are? What types of assets are you looking to invest in? Answering these questions is not always easy. You can check out our guide to choosing a stock broker to gain further insight so you can make a sound decision. Once you've made a decision on a broker, you can also check out our guide to opening a brokerage account.
NinjaTrader Group, LLC Affiliates: NinjaTrader, LLC is a software development company which owns and supports all proprietary technology relating to and including the NinjaTrader trading platform. NinjaTrader Brokerage™ is an NFA registered introducing broker (NFA #0339976) providing brokerage services to traders of futures and foreign exchange products.
Money is increasingly flowing out of the mutual fund industry and into exchange-traded funds (ETFs). Some investors (and most robo-advisors) use ETFs exclusively to build a balanced portfolio meant to walk the optimal line between risk and reward. To determine the best online broker for investing in ETFs, we looked at research capabilities specific to finding the best ETFs for a customer’s specific purpose. Top-notch screeners, analyst reports, fundamental and technical data, and the ability to compare ETFs are the main components of this award.
When selecting a new online broker, the first step is to read reviews and see what features matter most to you. Are low-cost trade commissions most important? What about customer service, the trading platform, mobile app, investment research, ease of use, or education? With many brokers specializing in different areas, it is crucial to evaluate all categories by reading full-length broker reviews.
Every investor should try to establish what their goals and objectives are prior to investing. There isn’t necessarily a wrong objective, but it’s more important to understand your goals because that will help drive your decisions. For instance, if you plan to regularly trade in and out of stocks, you might be better off opening an IRA account so you don’t have to pay taxes on your trades. If you plan to be a long-term investor, taxes won’t be as important of a factor and you could hold your account in a taxable or tax-free account.
Before making your first investment, take the time to learn the basics about the stock market and the individual securities composing the market. There is an old adage: It is not a stock market, but a market of stocks. Unless you are purchasing an exchange traded fund (ETF), your focus will be upon individual securities, rather than the market as a whole. There are few times when every stock moves in the same direction; even when the averages fall by 100 points or more, the securities of some companies will go higher in price.
A stop-loss order is designed to limit losses on a position in a security. For long positions, a stop loss can be placed below a recent low, or for short positions, above a recent high. It can also be based on volatility. For example, if a stock price is moving about $0.05 a minute, then you may place a stop loss $0.15 away from your entry to give the price some space to fluctuate before it moves in your anticipated direction.
The Intelligent Investor by Ben Graham ought to be required reading for every private investor. While the innovations he brought to stock analysis have long been outdated and the red flags he used to watch out for in a company's accounts are now regulated against by the SEC, many of his insights about thinking about investment still stand. For example, his description of Mr Market is still an excellent way of understanding how a crowd moves with the daily news.
For the active trader, execution speed and fill price are very important. I won’t get too in depth here but I have tested many of these brokers and there can be noticeable differences in trade execution times and quality. For the majority of investors, saving a penny per share on a 100 shares order isn’t the end of the world, but for active traders it is something to look into. To understand Order Execution, read this guide.
Finally, trading platforms may have specific requirements to qualify for their use. For example, day trading platforms may require that traders have at least $25,000 in equity in their accounts and be approved for margin trading, while options platforms may require approval to trade various types of options before being able to use the trading platform.
There are two types of trading platforms: prop platforms and commercial platforms. As their name indicates, commercial platforms are targeted at day traders and retail investors. They are characterized by ease-of-use and an assortment of helpful features, such as news feeds and charts, for investor education and research. Prop platforms, on the other hand, are customized platforms developed by large brokerages to suit their specific requirements and trading style.
Note that once a broker has identified you as a pattern day trader due to the above activity, your account will likely be considered a pattern day trading account going forward, even if you don’t continue to meet the definition. If you decide to stop day trading, you’ll want to contact your brokerage and ask that they remove the minimum equity requirement from your account.