A discount broker provides reduced commissions on trades. While these rates are relatively inexpensive, discount brokers do not provide other services that full-service brokers typically would, like investment advice, analysis, and retirement planning. Many cost-conscious traders look for brokers with very low fees. This type of broker can also be attractive to more experienced traders who do not need investment advice or analysis. When looking at our top discount brokers, we overweighted the cost categories in our methodology and ensured that trading technology was still an important factor. Here are our top five discount brokers:
- Interactive Brokers
- Account Minimum: $0
- Fees: $0.005 per share
Interactive Brokers' order routing system is likely to find you enough price improvement to offset any trading costs. Their toolset for frequent traders helps find appropriate trades.
Interactive Brokers also received awards for Best Overall Online Brokers, Best for International Trading, Best for Options Trading, Best for Penny Stocks, and Best for Day Trading.
Low trading costs and margin rates
The platform and services are geared for active traders
Clients can trade on 120 markets in 31 countries, using 23 currencies
Good charting and portfolio analysis
Small or inactive accounts are subject to additional fees
Mosaic, the primary platform, has a steep learning curve
Quotes stream on only one device at a time
- Account Minimum: $0
- Fees: $0
- Best for: Low Costs and a sleek app
Robinhood does not charge any trading commissions, but you pay a monthly fee up front for their Gold service, which gives you access to margin loans. Orders are not routed to get you the best possible price, so your actual trading costs are likely to be higher.
Stocks and options trade commission-free
Mobile app and website are very easy to use
Snapshot quotes only, no streaming
Very little research available
Trades may not be routed in the customer's best interest
- Account Minimum: $0
- Fees: $5.00 stock trades $1.00 options trades
Bargain hunters, especially those who trade options frequently, will like tastyworks’ pricing schedule. The firm charges commissions only to open a position; closing a position is free. Tastyworks also caps its options fees at $10 per leg, so if you trade spreads with 20 or 30 contracts per leg, you will save a lot of money.
tastyworks also received awards for Best for Day Trading and Best for Options Trading.
Very stable platform
Commissions charged only for opening positions
Excellent tools for analyzing derivatives
Limited portfolio reporting in platform
Platform may overwhelm new traders
Must call a live broker for mutual funds
- Account Minimum: $500
- Fees: $3.00 per trade
eOption's low-cost, no-frills web platform offers speedy executions but few creature comforts. You can connect to their trading engine using Sterling Trader Pro or DAS Trader if you want better charting and analysis.
eOption also received an award for Best for Penny Stocks.
Great value for frequent options traders
Ability to auto-trade newsletter alerts
Easy to use web-based platform
Limited education offerings
News and research is limited
Basic web platform feels dated
- Account Minimum: $10,000 (web), $25,000 (software)
- Fees: Max $4.50/stock trade, $0.65/options contract. No charge per leg.
- Best for: Cost-conscious & active traders.
Lightspeed aims its technology and services at high-velocity stock and options traders. Its commission schedule is tiered, so the more you trade, the less you will pay per transaction. Account minimums are high, but the cost of trading is low.
Note: Costs for frequent trader are likely to be lower if the customer switches to per-share pricing from flat-rate.
Lightspeed also received awards for Best for Options Trading, and Best for Day Trading.
Customers can route their own orders
Very fast trade executions
Prompt, professional customer service
High minimums to open account
Professional platform is hard to use
Few creature comforts
What Do Brokers Charge To Trade?
Brokers can charge a variety of fees depending on the services they offer. Here are some fees you can typically expect at a brokerage:
- Stock Trade Fee (per trade): Typically between $0.00 and $6.95
- Stock Trade Fee (per share): Typically between $0.006 and $0.01
- Broker-Assisted Trade Fee: Typically between $0.00 and $50.00
- Mutual Fund Trade Fee: Typically between $0.00 and $50.00
Some brokers charge a per-leg fee for options trades, so frequent spread traders might want to look for brokers who only charge a per-contract fee.
Rise of Free Trading
The landscape of the online brokerage industry has changed dramatically over the last few years, most notably with the change in costs for clients. As volatility returned in 2018 many investors retreated to the sidelines. As a result, brokers needed to make their platforms as attractive as possible to bring fearful investors back.
One method for doing so was by reducing commission fees which, in some cases, went as far as making trades completely free. As brokerages reduced costs, it caused a chain reaction. Brokers needed to remain competitive and lower their prices.
While most brokers were simply reducing costs for their clients, others were going a different route by completely eliminating commissions. One of the early pioneers of commission-free trades was Robinhood. Though they charge no commissions for trades, they make money in other ways, including payment for order flow and interest on cash in accounts.
Discount Brokers vs. Full-Service Brokers
There are different types of brokers that beginning investors can consider based on the level of service and cost you are willing to pay. A full-service, or traditional, broker can provide a deeper set of services and products than what a typical discount brokerage would. Full-service brokers can offer their clients financial and retirement planning as well as tax and investment advice. These additional services and features usually come at a steeper price.
If you are looking for a cheaper, more hands-on approach, a discount broker is a better choice. Discount brokers offer low-commission rates on trades and usually have web-based platforms or apps for you to manage your investments. Discount brokers are less expensive, but require you to pay close attention and educate yourself. Luckily, most discount brokers provide educational resources to help you learn to trade and invest.
Pros & Cons of Discount Brokers
Discount brokers can be ideal for those looking to save money, but if you are newer to the investment world and need more hands-on guidance they may not be worth it for you.
No need to worry about biased investment recommendations
Access to basic educational resources to help you do it yourself
No advice or guidance
Possible hidden fees
Less hands-on customer service
Investopedia’s mission is to provide investors with unbiased, comprehensive reviews and ratings of online brokers. Our reviews are the result of six months of evaluating all aspects of an online broker’s platform, including the user experience, the quality of trade executions, the products available on their platforms, costs and fees, security, the mobile experience and customer service. We established a rating scale based on our criteria, collecting over 3,000 data points that we weighed into our star scoring system.
In addition, every broker we surveyed was required to fill out a 320-point survey about all aspects of their platform that we used in our testing. Many of the online brokers we evaluated provided us with in-person demonstrations of their platforms at our offices.
Our team of industry experts, led by Theresa W. Carey, conducted our reviews and developed this best-in-industry methodology for ranking online investing platforms for users at all levels. Click here to read our full methodology.