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Trading software and commission comparison of online stock brokers

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Trading software and commission comparison of online stock brokers

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After discussing about why an ECN online stock broker is best choice, it’s time to compare their online trading software and commissions. If we want to make money by stock trading, we do require the best trading software available and the lowest commission. As the trading interface is a personal preference and what makes me comfortable trading, may make you unconfortable, my investment advice is to make your own decision. Commission does play its role, but in the end if we can’t trade efficiently due to the trading software, commission does come second.

Personally I only have experience with Interactive Brokers Trader Workstation. It is far from perfect but gets the job done. There are occasional disconnections, minor delays in stock charts when changing stocks or currency pairs, but their order executions are very quick and you can arrange the windows in any way you want. However most online stock and forex brokers offer a few features that will make our trading lives easier. You can connect third party trading software with their data feed and work on other charting software, which you find more suitable to trade with. Remember, forex trading and buying stocks requires peace of mind and speed. If you can’t have both, you’d be better looking for a solution.

There are many trading applications that offer tremendous charting capabilities, like NinjaTrader, SierraCharts, AmiBroker, TradeStation and Metastock. The most popular of those is surely NinjaTrader. I myself have tried all of the above except TradeStation, but I ended up trading forex and stocks via Interactive Brokers own trading software. It just suits me best. Don’t forget my investment advice; always choose whatever you find suitable to your own style. These pieces of trading software can be connected to your online stock brokers’ data feed and use that feed to draw real time stock charts. Most of them allow you to also buy stocks through them and execute any forex trading order via their forex charts or trading ladders.

All these do come for a price though. The cost of such trading and investment tracking software can be quite high and can reach a couple of thousand dollars per year, although they offer trial periods for their products. I have tested several of them and I believe NinjaTrader is offered for free but you are not able to trade using it. You can just use it for applying technical analysis on real time charts. Maybe that is why NinjaTrader is so popular, the magic word “free” with restrictions though. So, my investment advice regarding the trading software is to check out the built in trading software of your online stock broker and test out NinjaTrader as an alternative. Another free trading software concerning charting features is AmiBroker, have a look at that as well. As for your trading orders, I recommend trading using your online broker’s software until you have earnt enough to afford an expensive trading software.

Finally, commission is an important factor in online forex trading and stock trading as well. I should remind that most of the online stock brokers allow you to trade forex as well, that is the reason I am not referring to stock trading only. Anyway, commission in forex trading costs about 0.5 to 1 pip. Say you buy eur/usd at 1.2500 and sell at 1.2510. Your profit is 10 pips but you have to deduct commission costs from that profit. The commission, which would be a percentage of your trading lot, usually corresponds to cost of pips. Although only bucket shops announce that they don’t charge commission in forex trading but actually have 0.8-1.5 pip spread between the bid and ask prices, ECN brokers charge commission but don’t have any spread between the prices. However I prefer comparing commission in terms of pips, due to easier comprehension. On the other hand though, I should note that commission in ECN brokers does reduce as long as you increase your trading activity and volume. But since we are talking for new forex traders, that won’t be an issue for several months if not years.

As far as commission in online stock trading concerns, the cost is once again either percentage of your trade size, or cents per number of shares. For example, in most European stock markets they charge you 0.1% commission of the trade value with a maximum cap per order (different per country). Note that UK stock market charges the trader 0.5% stamp tax which is often passed through to the trader. Trading US stocks is somewhat cheaper, as the commission charged is 0.005$ per share traded.

If you have got lost with all those numbers I will make a much easier comparison among stock markets and their commission, at least trading with Interactive Brokers. If I want to buy stocks in a European stock market other than UK, stock prices need to move 4 ticks in favor in order for me to break even including commission. If on the other hand want to buy stocks in US stock market, stock prices need to move 1 tick in favor for the same result. That is why I prefer trading US stocks instead of European.

Finally, I must not forget the cost for the data feed an online broker charges you for. Since we need stock charts, we also need real time stock quotes. If you prefer trading with 15 minute delay you don’t have to pay anything more, but as an investment advice you should opt in for real time data feed. Knowledge is power in trading and you should not trade a stock or currency pair if you don’t know what has happened the last minutes if we are talking about day trading. Costs for data feed depend on the stock market but generally aren’t expensive. Expect to pay about 10-20$ or euros per stock market for real time data and Level II data on a monthly basis.

As a final article of this series about stock and forex trading for a beginner, I will be adding some general investment advice for beginners in online stock trading.

Jim entered the financial world by trading sports and now invests in US stock markets and forex, trying to buy low and sell high. Connect with Jim: StockTwits | TradingView

  • Stockdonator

    Nice blog…..keep posting.