Online Trading: Beyond the Super Bowl Ads and Sales Ploys it's the Numbers

Consumers are often entertained by Super Bowl ads and other creative commercials, but rarely are they fooled. Savvy consumers look beyond funny commercials and sales ploys and all the other fluff.. The bottom line for sophisticated investors looking for an online stock trading company is the ticket cost, not a baby spitting up or a second rate TV actor's opinion.

Fine print, usually disguised like boiler plate disclaimers in small, dull font arguably intended to assure that the strain of reading it will make most people skip the task. Nebulously imbedded in that fine print is the real information potential customers require to determine if the online trading company is both: what the consumer wants and needs as well as the real cost to do business with that company.

Some of the biggest names in online trading are: E-Trade; ChoiceTrade; TDAmeritrade; Scottrade; Schwab and Fidelity. Whether these firms have reached their lofty status due to large advertising budgets, industry feeder agreements, customer service, or low cost service is hotly debated. These are all well-regarded companies in Barron's annual report of online trading companies. A comparison of these companies may be a real eye opener to sophisticated investors and high net worth plain vanilla investors.

Penny Stock Trading
Penny stock trading is quite common with millions of investors and speculators engaging in the trading of large quantities of penny stocks. The two companies that publish the cheapest rates are ChoiceTrade ($5) and Scottrade ($7). At first blush these two are similarly priced, though there is an important distinction to note that can significantly impact the true cost of these trades.

ChoiceTrade offers the $5, unlimited shares trade with no surcharges for penny stocks. Scottrade on the other hand offers the $7 trade but also charges ½% of the principal value of stocks under $1. If you do not notice that in the fine print you may find your trading to be much more costly than expected. A purchase of 10,000 shares of a stock @.75 through Scottrade would carry an all in commission cost of $44.50 Not only can this can add up quickly for active investors but it is 535% higher than the $7 posted rate How many penny stocks investors would want to enjoy a return of 535%, but that is basically what the broker is getting.

Rates and the Fine Print
Most online companies only promote their lowest base rate. This is a sales gimmick that marketers have loved for decades. There is nothing wrong with the practice as long as consumers take the time and make the concerted effort to really understand what their rates may be.

Of the six companies researched for this article, only ChoiceTrade and Scottrade have a simple price structure that does not include sliding scales, minimum and maximum shares per trade, and all the other fee enhancements that the brokerage firms use to pad their profits at the expense of the investors.

For example, Fidelity ($19.95 base) charges $0.0156 for each share over 1,000 shares, When trading in large volumes this number adds up quickly. For example a recent purchase of 15,000 shares of Citigroup (Symbol C) would have an all in commission of $ 238.35 which is 1195% above the base rate.

Schwab's posted rate of $8.95 has limits in the number of trades you can do at that rate; while E-Trade's $12.95 trading promotion also has limits and rules pertaining to the number of trades and value of the assets. Why would- or better yet why should- it cost more money to do the eleventh trade in a cycle rather than the tenth trade in that cycle?

Annual Maintenance Fees
Annual maintenance fees is not something highlighted in a clever television ad, nor any website. Chances are you will find it in the fine print. Of the companies mentioned in this article, only E-Trade charges an annual maintenance fee on accounts.

Direct Access Trading
Direct access trading is something many of today's savvy investors are interested in. The reward for spending a very considerable amount of time on many of the stock trading websites, will be the discovery that the only companies that offer direct access trading are ChoiceTrade and Schwab. Traders looking for this from day 1, or traders that may want this ability in the future will find that only these two companies that have this feature.

Advice
The wisest consumers know in the end that whichever of the six highly rated companies they choose they will certainly be able to execute trades and meet the majority of their needs: the tools and the cost to do business should be the determining factors.

Develop your own list of the exact tools and services that are important to you. Add a series of columns for each broker and fill in the cost of the service if provided. Then you can see a side by side comparison of the companies that actually meet your needs and the best pricing.

Enjoy the commercials, laugh at the ads, but in the end if you do your homework and look beyond glitz and sales gimmicks you will be able to make the right choice for stock trading.

For more information:- http://www.choicetrade.com