Online Brokers and Trading Platforms 2023
Compare the best online brokers and their trading platforms to make sure you pick the most appropriate to your needs. Use the comparison of spreads, range of markets and platform features to decide the best broker for you. Here we list the top online brokers in 2023, with full expert reviews of their trading platforms.
The Best Online Brokers
To date (October 2023) we have reviewed over 450 brokers and found that these are the 5 best brokers for online trading:
- Forex.com - Forex.com is an excellent broker for forex traders with over 80 currency pairs, tight spreads, low commissions and powerful platforms. The brand is also heavily regulated while its parent company is listed on the NASDAQ, giving it a high trust score.
- eToro USA - eToro is a top pick for users looking for social investing and copy trading. With a low deposit, zero commissions and an intuitive platform, the broker will meet the needs of newer traders.
- NinjaTrader - We recommend NinjaTrader for high-volume futures traders looking for low fees and premium analysis tools.
- OANDA US - We recommend OANDA for US traders seeking a user-friendly platform with premium market research and a straightforward joining process. OANDA is a particularly good pick if you want a heavily regulated broker with a secure trading environment.
- Kwakol Markets - Kwakol Markets is a good option for newer traders with a dedicated learning academy, copy trading and a choice of reliable platforms. New clients can also sign up and start trading in four straightforward steps.
Top 3 Broker Comparison
| Forex.com | eToro USA | NinjaTrader | |
|---|---|---|---|
| Instruments | Forex, Spot Metals | Stocks, Options, ETFs, Crypto | Forex, Stocks, Options, Commodities, Futures, Crypto |
| Regulator | NFA, CFTC | SEC, FINRA | NFA, CFTC |
| Platforms | MT4, MT5, TradingView, eSignal, AutoChartist, TradingCentral | Own | eSignal |
| Minimum Deposit | $100 | $10 | $50 |
| Minimum Trade | 0.01 Lots | $10 | 0.01 Lots |
| Leverage | 1:50 | 1:50 | |
| Visit | Visit | Visit | Visit |
#1 - Forex.com
Forex.com boasts a global reputation with multiple awards and 20+ years experience. Regulated in the US, EU, UK and Canada they provide a huge range of markets, not just forex, and offer competitive fees on a cutting-edge platform. The brand also provides a suite of additional tools, from performance analytics and SMART Signals to advanced charts and strategy builders.
"Forex.com is an excellent broker for forex traders with over 80 currency pairs, tight spreads, low commissions and powerful platforms. The brand is also heavily regulated while its parent company is listed on the NASDAQ, giving it a high trust score."
- DayTrading Review Team
- Instruments: Forex, Spot Metals
- Regulator: NFA, CFTC
- Platforms: MT4, MT5, TradingView, eSignal, AutoChartist, TradingCentral
- Min. Deposit: $100
- Min. Trade: 0.01 Lots
- Leverage: 1:50
Forex Trading
Forex.com is a leading FX broker. The brand offers a wide range of currency pairs and some of the lowest fees in the industry. Spreads on the EUR/USD come in as low as 0.0 with a $7 commission per $100k.
Stocks Trading
Forex.com offers access to thousands of US, EU and UK stocks, with spreads of just 1 point. Speculate on household names as well as new IPOs. US stocks are available from just 1.8 cents per share.
Pros
- Excellent trading tools including Trading Central, SMART Signals and MetaTrader 4
- Respected and trusted broker overseen by tier-one regulators including the US SEC
- Beginner-friendly web platform and mobile app
Cons
- Investment offering varies between countries
- No copy trading platform
- $15 monthly inactivity fee
#2 - eToro USA
eToro is a social investing platform that offers stocks, ETFs, options, and crypto. The broker is well-known for its user-friendly community-centred platform and competitive fees. With FINRA and SIPC oversight and millions of users across the world, this brand is highly respected. eToro securities trading is offered by eToro USA Securities, Inc.
"eToro is a top pick for users looking for social investing and copy trading. With a low deposit, zero commissions and an intuitive platform, the broker will meet the needs of newer traders."
- DayTrading Review Team
- Instruments: Stocks, Options, ETFs, Crypto
- Regulator: SEC, FINRA
- Platforms: Own
- Min. Deposit: $10
- Min. Trade: $10
Stocks Trading
Trade popular US stocks and ETFs with zero commissions while fractional shares and options are also available. The eToro Academy and excellent market research are also huge bonuses for newer investors.
Crypto Trading
eToro US leads the way in cryptocurrency trading. 1% fee for buying or selling crypto added to the spread (from 0.75% for BTC), with their own wallet service and the largest number of cryptos to trade in the market. eToro copy trading is only for cryptos. Crypto asset investing is highly volatile and unregulated. No consumer protection. Tax on profits may apply.
Pros
- The $10 minimum deposit and straightforward account opening process means beginners can get started quickly
- eToro USA Securities is a trustworthy, SEC-regulated broker that is a member of FINRA and SIPC
- The online broker offers an intuitive social investment network with straightforward copy trading on cryptos
Cons
- No MetaTrader 4 platform integration
- Narrower range of instruments than some competitors
#3 - NinjaTrader
NinjaTrader is a US-headquartered and regulated brokerage that specializes in futures trading. There are three pricing plans to suit different needs and budgets, as well as ultra-low margins on popular contracts. The brand's award-winning charting software and trading platform also offers a high-degree of customization and superb technical analysis features.
"We recommend NinjaTrader for high-volume futures traders looking for low fees and premium analysis tools."
- DayTrading Review Team
- Instruments: Forex, Stocks, Options, Commodities, Futures, Crypto
- Regulator: NFA, CFTC
- Platforms: eSignal
- Min. Deposit: $50
- Min. Trade: 0.01 Lots
- Leverage: 1:50
Forex Trading
NinjaTrader supports the trading of popular currencies including the EUR/USD. The trading software also offers unique features tailored to forex trading, including specific order and market windows.
Stocks Trading
Stocks can be traded by connecting the NinjaTrader platform to supporting brokers. You can then take positions on large public companies and household names via advanced trading software.
Crypto Trading
Trade micro Bitcoin futures with low fees and leading charting tools. Get exposure to Bitcoin through CME Group's centralized exchange with robust risk management tools.
Pros
- Thousands of add-ons and applications from developers in 150+ countries
- Widely respected and heavily authorized by the NFA and CFTC
- Excellent trading software for active users with bespoke widgets and indicators
Cons
- Premium platform tools come with an extra charge
- Withdrawal fee on some funding methods
- Non forex and futures trading requires signing up with partner brokers
#4 - OANDA US
OANDA is a popular brand offering exceptional execution, low deposit requirements and advanced charting and trading platform features. The top-rated brand has over 25 years of experience and is regulated by trusted agencies, including the NFA/CFTC. Around the clock support is available, alongside flexible contract sizes and automated trade executions.
"We recommend OANDA for US traders seeking a user-friendly platform with premium market research and a straightforward joining process. OANDA is a particularly good pick if you want a heavily regulated broker with a secure trading environment."
- DayTrading Review Team
- Instruments: Forex, Crypto
- Regulator: NFA, CFTC
- Platforms: MT4, TradingView, AutoChartist
- Min. Deposit: $0
- Min. Trade: 0.01 Lots
- Leverage: 1:50
Forex Trading
OANDA offers 68 forex pairs, more than many alternatives. The broker's in-house platform also offers impressive execution speeds and a suite of advanced charting and analysis tools.
Crypto Trading
Speculate on the world's biggest cryptos by market cap. Commissions are lower than many peers starting at 0.25%. Clients can spot trade cryptocurrencies on Paxos's itBit exchange through the OANDA platform via OANDA’s partnership with Paxos. Users can trade digital currencies in a few taps through the iOS and Android mobile app.
Pros
- The OANDA web platform offers advanced price charts and graphs
- Feature-rich app with 50 indicators, 11 drawing tools and 9 charting styles
- Reliable, trustworthy and secure brand with authorization from tier-one regulators
Cons
- Customer support not available on the weekend
#5 - Kwakol Markets
Kwakol Markets is a Nigerian headquartered broker with strong regulatory oversight in Australia and Canada. A great selection of asset classes are available, including synthetic products that simulate realistic market activity. Clients can trade on the MT4, MT5 and cTrader platforms, as well as a copy trading solution whereby a fee is only paid on profitable trades.
"Kwakol Markets is a good option for newer traders with a dedicated learning academy, copy trading and a choice of reliable platforms. New clients can also sign up and start trading in four straightforward steps."
- DayTrading Review Team
- Instruments: CFDs, Forex, Stocks, Indices, Commodities, Crypto
- Regulator: ASIC, FINTRAC
- Platforms: MT4, MT5, AutoChartist
- Min. Deposit: $1
- Min. Trade: 0.01 Lots
- Leverage: 1:1000
CFD Trading
CFDs are available on a breath of underlying assets, including stocks, indices, commodities, forex and cryptos. High leverage up to 1:500 is available alongside a 0.01 minimum lot size and award-winning software. For the tightest spreads from 0 pips, opt for the Premium account.
Forex Trading
Kwakol Markets offers a wider range of forex pairs than most competitors, with 90+ assets available. Users get fast execution speeds through the ECN model and competitive spreads. On the negative side, not all currency pairs are available on MT4.
Stocks Trading
Trade stocks with zero commissions and ultra-fast trade executions. Clients get exposure to US, EU, Asian and Russian stock markets on both the MT4 and MT5 platforms. Stocks are available as CFDs, so users will not own the underlying shares.
Crypto Trading
Trade cryptos against fiat currencies, other cryptocurrencies and metals like gold. This separates the broker from many alternatives that only offer cryptos paired with the USD. High leverage up to 1:20 on cryptos is available, plus support for Expert Advisors and copy trading.
Pros
- Demo account available
- Excellent market analysis tools
- 2FA login security
Cons
- Regional restrictions in certain countries
- High deposits for premium features
- Lack of deposit and withdrawal methods
More Brokers
How to Compare Online Brokers
Before you can find the best internet broker for active trading you should determine your own investing style and define your individual needs – how often will you trade, when, for how much money and using which financial instruments?
Then, when choosing from all the top-rated brokers, there are several factors you can take into account.
If you simply pick the broker with lowest fees, you might have to compromise on trading platform features (or face hidden costs later).
It is best to do a comparison of several trading platforms and features, both locally and from all over the world, to find one that suits your needs.
There is no one size fits all when it comes to online brokers and their trading platforms. Platform layout might be a personal preference, likewise accounts with balances in specific currencies.
Much like traditional brokers, the best online brokerage will tick all of your individual requirements and details.
These are some of the key points and areas to compare in this competitive market:
Costs
- Do they offer low commission rates? – As an active day trader, for example, that is placing numerous trades intraday, low commissions over a long period will bolster your overall performance. Finding online brokers with the lowest fees is crucial. See our list of best day trading brokers.
- Do they offer attractive margin rates? – Trading on margin increases your exposure to risk on each trade, rapidly increasing both profits and losses. Use with care.
- Do they have a complicated fee structure? – Online broker fees can rack up quickly. You need to look at the fine print to ensure you won’t get stung by hidden costs later down the line, such as when you want to withdraw your money. Having said that, the cheapest online brokers for active trading usually make up that money in other areas, such as customer service.
- Will you need a minimum deposit?- Some online brokers will require you to put down significant capital to open an account and start investing. For example, if you’re investing at Interactive Brokers you’ll need to put down serious cash before you can get to work.
- Does the broker have a daily activity limit? – Some limits are imposed to protect against extreme volatility and market manipulation. But the Interactive Brokers investing limit can be set by you to prevent you from losing too much capital in a set period.
- Do they offer different account types? – Different accounts will come with varying costs and attractive perks. For example, choose between Interactive Brokers accounts and you can get lower commission fees, greater leverage and enhanced tools for technical analysis. Read more about Account types here.
- Do they process trades fairly? – Execution speed is a complex subject, traders should focus on execution quality. This ensures their interests are better aligned with the broker. Read more about Execution Quality here.
Online Trading Platform Features
- Do they have high tech, informative tools for research and analysis? – You will need live price quotations, and both detailed charts and access to historical data will also help you trade smarter. The top 10 online brokers all offer a multitude of tools and resources.
- How quick and efficient is their order execution? This is massively important if you’re short-term trading, as just a few seconds could cost you serious cash. Whilst many virtual brokers offer real-time execution, there remains a slippage concern, meaning you could pay a price higher than you’d hoped. This highlights the need to test drive your online broker first.
- How user-friendly is their trading platform? – The platform provided by the broker needs to work for you. Most online retail brokers offer several to choose from, some will tick the boxes for the average day trader, others will offer more advanced platforms for the longer-term, veteran trader. Likewise, does it suit your hardware – is the platform compatible with Mac, Windows, Linux, or whatever you use?
- Is there a mobile platform? – It is rare for an online-only broker not to deliver a mobile app, but the quality will vary. If investing on your mobile phone is important, then checking the app’s compatibility (Android, iOS or Windows etc.) will be vital. Nowadays, many brokers are purely app-based, like Robinhood. Consider whether this is right for your trading style.
Customer Service
- How good is their customer service? – Will you be able to quickly get in contact with someone when you need support or advice? This is particularly important if something goes wrong like a computer crash. Some brokerages offer 24/7 customer support, with call waiting times of less than one minute. This is particularly crucial when trading assets that are available to trade round the clock, such as Bitcoin or another cryptocurrency.
- Do they have a ‘dealing desk’? – The best online brokers offer direct access. You don’t want to be sending an order to a train desk that then initiates it in the market. This is time-consuming and can result in re-quotes. By the time you’ve confirmed you want to proceed, your profit opportunity has probably vanished.
Assets and Markets
- Do they offer the right asset classes? – Not all online brokers offer every market and asset type as they may not have access to all of them. If you know you wish to invest in gold, ETFs or fractional shares, find online brokers offering these. One broker may be great for penny stocks but be very limited in its provision of cryptocurrencies.
- Can you access your preferred markets? – Many, though not all, online brokers are limited by geography. If you are in the UAE or Hong Kong but want to find a discount broker in India, you may not be able to invest in stock markets in Mexico or New Zealand. Some top online brokers may offer global trading services, though these are often located in bigger countries, like Japan, Australia or the USA.
Extras
- Do they offer any attractive extras?– Any ‘Open Account’ promotions?£100 in free trades, which may not seem like a lot, could mean you can iron out any creases in your strategy before it’s your money on the line. Investing without a broker means zero free credit for trial and error.
- Are there Account levels? Does a VIP account get free Level II data or reduced spreads?
- What returns do you get on your cash? – You’ll find you usually have something lying around in your brokerage account. Some online brokers won’t offer you a penny on that balance, but some will give you 3-5%.
- Strategy – Can you implement your strategy, or even use automated trading, signals or copy trading at this online platform? Perhaps you need an online broker that will allow the ability to diversify your portfolio through smaller trades, such as micro-lots or fractional shares? Does the broker allow short selling, enabling you to hedge your trades?
Final Word On Comparing Online Brokers
Do your homework and make sure your online broker can cater to your specific requirements. It’s always worth giving your potential trading platform a test.
Set up a demo account, make sure you like the platform, and send off some questions to gauge how good their customer service is. Get this choice right and your bottom line will thank you for it.
Need a shortcut? Check out the winners of the DayTrading.com Awards this year.
What Is An Online Trading Platform?
Online brokers have in part become popular because of their simple online registration and easy to use online trading platforms, which make retail trading much more accessible.
The trading platform is the software used by an investor to see price data from the markets and to place orders with a broker.
Market data can either be retrieved from the broker in question, or from independent data providers like Thomson Reuters. In this section, we detail how to pick the best online trading platform.
Normally, an online broker will offer their customers a branded trading platform that’s more or less unique to that individual broker, but there are also independent solutions that can connect to multiple online brokers.
An independent platform can be a good choice for the experienced trader, whereas using a broker’s own platform is the easiest way to get started for new traders.
Online Trading Platform Features
The best online trading platform will have a combination of features to help the trader analyse the financial markets and place trade orders quickly. In particular, a top-rated platform will offer excellent implementations of these features:
- Access to current and historic market data – A trader needs to be notified of market price changes as soon as possible to be able to act before an opportunity is gone or a loss has materialised. Historic data is necessary for technical analysis and backtesting of strategies. Not all online trading platforms have a backtesting feature, though, so check before you commit to a specific piece of software.
- Charting and other visual aids – Trends and market sentiment are best visualised through different charts and plotting of relevant technical indicators.
- Order execution – Once you have decided to place a trade, it needs to be executed on the market immediately. A great online broker platform will execute orders in less than a second. Investors that use automated trading want even faster execution, usually counted in milliseconds, depending on the strategy used and how price-sensitive it is.
- Automated investing – A trading platform that offers automation capabilities enables a trader to make market moves even if he/she is not at the computer at the time. The classic “stop loss” feature is a simple form of automation, but there are much more advanced platforms that enable you to program your own robot to carry out elaborate strategies or to react much faster than you can do yourself.
- Broker independence (optional) – You might want to become an expert on all the features of your online platform but still have the option to change which broker you use. The solution is an independent trading platform (listed below), that can connect to several different online brokers.
Independent Trading Platform Comparison
An independent trading platform is used for visualising market data and managing your investment portfolio, but it needs to connect to one or more online brokers to actually place a trade on the market.
These professional investing platforms typically offer a more advanced interface than that of the average brokerage and help you to find and place trades with one or more online brokers of your choosing.
Using an independent platform you don’t have to relearn a whole new software just because you change to a different broker.
Independent platforms often come with advanced features such as enhanced charting and pattern analysis, automated trading and investing alerts/signals. Different online trading platforms have different strengths.
Note – Not all online brokers support this kind of integration with independent platforms, so use our reviews to find ones that do.
Live Accounts
When choosing between online brokers, you also need to consider the types of accounts on offer. For example:
- Do they offer cash and/or margin accounts?
- Can you get managed accounts?
- Do they offer a single standard account or do they offer different account levels?
The account that is right for you will depend on several factors, such as your appetite for risk, initial capital and how much time you have to trade. With that said, below is a breakdown of the different options, including their benefits and drawbacks.
Cash Accounts
Most online brokers offer a standard cash account. This is simply when you buy and sell securities with the capital you already have, instead of using borrowed funds or margin. Most online brokers will offer a cash account as their standard, default option.
Benefits
There are several benefits to cash accounts. Firstly, because there is no margin available, cash accounts are relatively straightforward to open and maintain.
Also, you have less risk than margin accounts because the most you can lose is your initial capital. Finally, you don’t have to pay the interest costs that come with margin accounts.
Drawbacks
Investing with a cash account also means you have less upside potential because there is no leverage. For example, the same gain on a cash and margin account might represent a 50% difference in returns because margin accounts require far less capital.
In addition, you have to wait for funds to settle in a cash account before you can trade again. At some online brokers, this process can take several days.
Overall then, the absence of margin means these accounts probably aren’t the right fit for the majority of active traders.
Margin Accounts
Most online brokers will offer a margin account. Essentially, margin trading allows you to borrow capital to increase your position size. For example, you may only pay half of the value of a purchase and your broker will loan you the rest.
Note – trading platforms often apply margin restrictions on certain securities during periods of high volatility and short interest.
Local regulation may also impact the margin or leverage offered, for example, the FCA in the UK have now said retail investors there are not able to trade cryptocurrencies on margin. ASIC in Australia and the SEC in the US currently take a different view.
Benefits
Margin accounts come with several benefits;
Firstly, you can choose when you pay back your loan, as long as you stay within maintenance margin requirements.
Secondly, you can leverage assets to magnify your position size and potentially increase your returns (or any losses).
Also, interest rates are normally lower than credit cards or bank loans.
Finally, if you have a concentrated portfolio, you may be able to use existing securities as collateral for a margin loan.
Drawbacks
Despite the benefits, there are serious risks. With a cash account, you can only lose your initial capital, however, a margin call could see you lose more than your initial deposit. You also have interest charges to factor in.
In addition, you need to check maintenance margin requirements. If not, you could get short-squeezed resulting in forced liquidation from a margin call.
Overall then, margin accounts are a sensible choice for active traders with a reasonable tolerance for risk.
Managed Accounts
Some online brokers also offer managed accounts. A managed trading account is simply when the capital belongs to you, the trader, but the investment decisions are made by professionals.
These might be referred to as an advisor on the account – these advisors have complete control of trades. There are two standard types of managed accounts:
- Pooled Funds – With this type of account your capital goes into a mutual fund along with other traders’ capital. The returns will then be distributed between the investors. Normally, online brokers divide these accounts according to risk appetite. For example, those looking for large returns may put their funds into a pooled account with a high risk/reward ratio. Those looking for more consistent profits would probably opt for a safer fund. Minimum investments for pooled accounts are around $2,000.
- Individual Accounts – With this account, your broker will manage your capital individually and make investment decisions tailored to your needs. The main benefit is having an experienced professional on your side. However, you will pay for that privilege with account maintenance fees and commissions. In addition, some online brokers will impose high minimum investments of at least $10,000.
Overall, managed accounts are a good fit for those who have significant capital but little time to actively trade. However, those with less capital and those with time or the inclination to enter and exit positions themselves may be better off with an unmanaged account.
PAMM accounts fall into this category.
Account Levels
Some online discount brokers, common in India for day trading, will offer just a standard live account. However, others will offer numerous account levels with varying requirements and a range of additional benefits.
For example, a Bronze account may be an entry-level account. Here you may get access to chat rooms, a weekly newsletter and some financial announcements and commentary. These entry-level accounts normally have low deposit requirements.
If you were to deposit more, say over $1000 and make a certain number of trades each month, then you may be eligible for a Silver account. This may grant you access to courses, a personal account executive and more in-depth market commentary.
Deposit a bit more, $5000 for example, and you may be eligible for a Gold account. For this you could get:
- 10% deposit bonuses
- Daily market research
- Referral incentives
- A dedicated mentor
- Telephone access to an active investing community
Finally, some online brokers will offer a top tier account, such as a VIP account. To qualify for this account you might need to deposit upwards of $20,000. You may also need to trade 500 lots quarterly, for example.
However, for your larger deposit, you might get even more hands-on help, as well as greater deposit bonuses, free trades and other financial incentives. You may also get full access to a wide range of educational and technical resources.
So, the best discount brokers will offer a number of account types to meet individual capital and trade requirements. It’s also worth bearing in mind that generally, the more you can invest the greater the perks and trading experience.
Final Word on Accounts
When choosing between online brokers, you need to consider whether they have the right account for your needs. The main factors to consider are your risk tolerance, initial capital and how much you will trade.
Note you can also open different accounts if you want to use several different strategies.
Regulation & Licensing
One key consideration when comparing online brokers is that of regulation. There are several different regulatory bodies around the world. The reputation of these authorities varies, but almost all can give consumers a high level of confidence in the online brokers they license. Here are some of the most highly ranked regulators;
- FCA (Financial Conduct Authority) – UK regulator, with responsibility for all forms of trading and market speculation
- CFTC (Commodity Futures Trading Commission) – US Regulator overseeing broker
- SEC (Securities and Exchange Commission) – US regulator for exchanges and markets
- FSB (Financial Services Board) – South African Regulator
- CySEC (Cyprus Securities and Exchange Commission) – Cypriot regulator, often used to ‘passport’ regulated brands across Europe
- BaFin (The Federal Financial Supervisory Authority / Bundesanstalt für Finanzdienstleistungsaufsicht) – German regulator
- Financial Supervisory Authority Denmark (Finanstilsynet)
The European Securities and Markets Authority (ESMA) also offers an over-arching guide to all European regulators, imposing certain rules across Europe as a whole – including leverage caps, negative balance protection, and a blanket ban on binary options.
These rules only apply to retail traders, not professional accounts. Any broker regulated by an ESMA approved authority can legally trade in any EU country, including Belgium, Netherlands, Germany, Spain, Poland, Luxembourg, Ireland and Greece.
Many jurisdictions do not require financial services to be regulated by their national authority to be able to trade.
Therefore, online brokers can operate by being regulated offshore or with one of the authorities mentioned above.
Examples include Switzerland, Bulgaria, the Bahamas, African nations, such as Ghana, Zambia, Nigeria, Kenya or Egypt and those across Asia, including, the Philippines, Malaysia, Pakistan, Oman, Qatar, Dubai, Korea, Thailand and Kuwait.
How To Try An Online Broker For Free
A demo account is a great way for novice traders to practice and test a broker or trading platform without using real money. A demo account is funded with simulated money, so you can try out the online broker’s platform features and get familiar with acting on the markets.
A warning though – even the best practice platform can’t replicate the pressures that come with having real money on the line, but it’s a great way to learn the basics and get started with zero risks.
How Online Brokers Make Money
Even among the top online brokers, you will find contrasting business models. Having said that, there are two main types:
- Market Makers
- Over-the-counter (OTC) brokers
Market Makers
Some of the best online brokers for day trading are market makers. Market makers are constantly ready to either buy or sell, so long as you pay a certain price. That means they may lose out in price shifts before they find a buyer/seller.
But, of course, for taking that risk, they seek compensation. So they set the bid price marginally lower than listed prices while setting the ask price slightly higher. That tiny margin is where they will make their money.
Now that may seem like an insignificant amount. However, tens of thousands of trades are placed each day through good online brokers for day trading that use these systems. Unsurprisingly, those minute margins can quickly add up.
Note online brokers using this model normally offer either fixed or variable spreads:
- Fixed spreads – By definition, these do not change, regardless of what is happening in the markets. Due to the additional risk, fixed spreads tend to be wider than variable spreads.
- Variable spreads – Fluctuate in response to market conditions. For example, during the London and New York overlap, an increase in liquidity leads to tight spreads.
Let’s take a look at an example – if you want to sell 50 shares of Tesla, good market makers will buy your shares, regardless of whether they have a seller lined up yet.
However, they may buy those Tesla shares for $300 each (the ask price), while offering to sell them to another trader for $300.05 (the bid price). That $0.05 is where your online broker is making their money.
These kinds of differences directly impact trade quality – read more about that here.
OTC Brokers
Many of the best discount brokers follow an OTC business model. In fact, they are the most popular type of online broker.
The immediate lure is the apparent lack of costs and commissions. However, on the best trading platforms, it isn’t quite that simple.
Essentially, an OTC broker will act as your counterpart. They will take the opposing side of your position. As a result, you don’t have to pay a commission or fees in the same way. You are simply trading against the broker.
The best OTC futures or CFDs brokers, for example, may have both sides of the trade covered, promising a handsome margin. However, some of the best online brokers may also hedge to offset risk.
The Comparison
There are several key differences between online trading platforms that utilise these systems:
- Increased liquidity – Effectively the best online brokers that follow the market maker model act as wholesalers, buying and selling to meet the needs of the market.
- Costs – Without market makers, finding buyers and sellers may take longer. As a result, liquidity may drop and you may pay higher fees as entering and exiting positions becomes harder.
- Motivation – A market maker will make money regardless of the outcome of your trade. Whereas an OTC broker has a vested interest in you losing out.
The top online brokers will often use a variation of one of these models. Check reviews to see which model a prospective broker is using to get a feel for where and how they expect to make their profit.
Broker Payment Methods
Different online brokers support different deposit and withdrawal options. The availability of specific payment methods can be of importance to traders, as fees and transit times vary between methods. For example, you might make it a hard requirement that an online broker accepts PayPal.
For some traders, it might be essential that a deposit or withdrawal is instantaneous, while others are fine with a processing time of a few days. Any trader making frequent deposits or withdrawals surely wants to look out for low transaction costs.
Cryptocurrency is one payment method about which online brokers take very different views. Cryptocurrency deposits are slightly riskier, particularly as some stablecoins are heavily linked with other (less stable!) coins.
- All payment methods for online trading
- PayPal Brokers
- Brokers with fast withdrawals
- Brokers with fast deposits
Different Regions
With the world migrating online, in theory, you could opt for brokers in India or anywhere else on the planet. However, there are tax considerations and regulations worth keeping in mind before you choose a broker in Australia, Singapore or anywhere outside your country of residence.
- Tax considerations – Where you trade and where your broker is situated may affect what type of tax and how much tax you will have to pay. Will you pay capital gains tax? Will you pay net income tax? If you start investing with online brokers from Canada, will you pay tax abroad and domestically? If you’re thinking of signing up with a far afield broker, find out the tax ramifications first.
- Regulation – Regulation is important for a number of reasons, but your financial security is one of them. Opt for online brokers regulated in well established financial systems, like the EU, USA or UK. A broker regulated in Bermuda is better than no regulation at all, but you may still encounter issues.
Canada and the US also have pattern day trading rules – but both are quite separate. Read more about this on the rules page. Just note that Canadian brokers may differ significantly from both US or European versions, and online brokers in South Africa will vary also.
Bottom Line
The online broker you choose will quite possibly be your most important investment decision. In this article, we’ve compared the top factors, helping you to evaluate what’s important to you.
Everyone’s requirements are different so there is no clear universal winner to turn to.
Once you know your requirements, you’ll then be able to compare brokerages and find the best trading platform for your needs.
FAQ
What is the best online broker in 2023?
There is unfortunately no single best broker for all traders- Trading frequency and access to specific instruments or markets are important factors that vary with each individual trader.
For example, if you make many small trades, the broker’s fees and the speed of the trading platform are important considerations. You also want access to good technical charts.
For infrequent trading these things are not as critical, but perhaps having access to cryptocurrencies is, and so on. To find a broker that fits your requirements, use our list of online brokers and read the the in-depth reviews for further details.
What is the difference between a broker and a trading platform?
Many consider “broker” and “trading platform” to be the same thing, but they are in fact slightly different.
A trading platform is the software that allows a trader to put buy and sell orders on the market. A broker is the company that facilitates the actual access to the markets and carrying out those orders.
A broker may offer multiple different trading platforms to its clients, for example an in-house proprietary software along with support for the popular MetaTrader 4 independent software platform.
This allows traders to pick the one they like best, and in the case of some independent platforms like MetaTrader, to trade via multiple different brokers on the same platform.