To trade securities in the open markets and exchanges a broker is needed. Brokers offer many different types of services much like a bank. The bank has different costs, services and locations. Brokers are very similar when they offer a wide variety of services. Brokers will work as the medium between you and the markets where the securities are traded. Many different types of brokers exist within the three major categories listed below. Review the list to determine the best type of broker for you.
Full Service Brokers offer to take full control of the money invested in the markets. Generally, Full Service Brokers assess risk tolerance and place the funds according to what is the allowable amount willing to be lost. Full Service Brokers charge commissions based on the level of service requested. Services offered vary, but can include; stock, option and mutual fund trading, a physical location, financial planning, and commission structure based on amount of trading activity and the risk assessment results.
Examples of Full Service Brokers (in random order):
Discount Brokers offer a much wider range of possibilities that include self-directed trading. Some have physical locations that can be visited. Discount Brokers have varying cost structures, minimum balances to open accounts and minimum balances for specific trading levels. The major difference between Full Service Brokers and Discount Brokers is the ability to trade your account online. Also, Discount Brokers do not offer the time intensive services as do Full Service Brokers as reflected in the commission scales. Many Discount Brokers have a 24-hour customer service phone line allowing convenient access to a customer service representative.
Examples of Discount Brokers (in random order):
Deep Discount Brokers center their business on cost. Deep Discount Brokers reduce cost according to the amount of trading activity, account balance, and trading level. Many Deep Discount Brokers generally do not have a physical location to visit. The trading website used by Deep Discount Brokers is geared toward being extremely user friendly to encourage the customer, you, to trade often. Some have toolsets, news leads, portfolio and trading screens. It is important to remember you get what you pay for, so when seeking an advisor for advice and someone to stop mistakes from occurring, Deep Discount Brokers are not the best choice. If planning to make the decisions independently, the Deep Discount Broker your connection to the market which is necessary to fill trade orders at the lowest cost possible.
Examples of Deep Discount Brokers (in random order):