Investopedia’s Online Broker Ranking Methodology

Investopedia's mission is to provide investors with unbiased, comprehensive reviews and ratings of online brokers. We are committed to helping investors at all levels find the right online broker for their needs. To provide the best advice for every investor, we designed a comprehensive ranking methodology to find the best overall online broker, and the best broker for 12 distinct types of investing and trading.

Our review team is led by Theresa W. Carey, who wrote the first ever review of online brokers in 1992, and has been an authority on online trading and investing platforms for 27 years. Our team of expert reviewers includes veteran traders, Certified Market Technicians, investing educators and researchers who are all active online investors with decades of experience.

We designed a system that rates brokers based on 10 key categories and 149 variables. Each category encapsulates the critical elements users need to thoroughly evaluate an online broker.

To collect the data, we sent questionnaires with 320 queries to the participating brokers. We obtained a live brokerage account for each platform, and used the account to perform hands-on tests for each broker. Many of the brokers we reviewed gave us in-person demonstrations of their platforms and services at our offices in New York.

From the questionnaires, the hands on testing of the broker platforms, and the demonstrations, we score each evaluation category, and combine the category scores into an overall rating for each broker.

With the individual retail investor in mind, we took a critical look at the services and technology provided by online brokers. We organized our analysis into ten categories, scoring each broker for its performance in each category. The score for the overall award is an average of the categories.

Each investor has different needs. Early investors need an online broker with an easy to use platform and educational resources, whereas an options trader needs risk analysis tools and ways to model various strategies. In addition to our overall rankings, we provide rankings for ten different trading and investing styles. In each case we use the same data, and re-weight the features that matter most for that style. The exact details of the re-weighting are provided on each of the category awards.

This category evaluates the overall workflow for placing an order.

A primary emphasis in this category is workflow that progresses logically from one step to the next. We checked out the ways a trader is told that an order is executed, such as pop-up notices, an order status update, and/or a text on a mobile device when the order fills.

We looked for pre-filled order tickets when closing a position, which eliminates possible errors during the closing process. A “Close” button when looking at a portfolio report is preferred. We also evaluated the options order-entry process, as well as mutual-fund, bond, and (when available) futures, commodities and foreign-exchange order-entry screens. Methods for placing conditional orders, such as one-cancels-another or one-triggers-another, were checked out.

Top marks in this category require:

• Straightforward, logical workflow
• A full range of order types online (market, limit, stop, good-til-cancelled, etc.)
• Generating a closing order directly from the portfolio listing and being able to select the tax lot
• Rolling an options strategy with a minimum number of clicks
• The ability to construct conditional orders (one triggers another, one cancels another, etc.)
• The ability to trade a basket of stocks, or stage orders
• A trading journal

This category primarily evaluates what goes on after the trader submits an order and also addresses pre- and post-trade data.

We evaluated the quality of the data available during the order entry process with an emphasis on streaming real-time data. The availability of price-improvement strategies and smart-order routing technology (which finds the best bid or offer) is necessary to earn top ratings in this category. We asked whether a broker’s order-routing engine used a spray or sequential engine; spray routing contacts multiple venues simultaneously and is less inclined to execute orders via routes that offer payment for order flow. Brokers offering price improvement – a sale above the bid price or a buy below the offer price – received a fraction of a point depending on the portion of their transactions that benefited.

Top marks in this category require that a broker offer:

• Streaming real-time prices throughout the process
• Order routing that emphasizes price improvement
• Ability to customize the trading experience, such as setting default number of shares or order type
• Ability to place a trade from a graph
• Real-time updates of buying power and margin balance

This category evaluates the overall site navigation and ease of use.

A 5 here means the site or program was easy to use and well-designed, didn’t bog down when moving from screen to screen and can be tailored to the user’s needs.

Top marks in this category require:

• Quick start for a new customer
• Easy access to research with a clear path to a trade ticket
• Current account status on display, if desired
• Constant availability of a trading ticket
• Being able to easily switch from one area of the platform to another
• Customization and personalization options

This category evaluates the mobile apps and HTML-5 powered websites that adapt to the mobile device being used.

The availability and quality of mobile trading and account data are key metrics here, as well as education opportunities that you can take along for the ride.

Top marks in this category require:

• Streaming real-time data, including charting and news
• The ability to trade stock and complex options on your tablet or smart phone
• The ability to trade all asset classes offered on the website or desktop platform
• Cross-platform integration is key. Watchlists set up on the desktop should be available on the mobile devices as well -- and vice versa
• Notification of alerts set on the desktop
• Smooth workflow for placing an order and managing an account

This category evaluates the asset classes a brokerage customer can trade online.

We awarded points for the diversity of investments that can be traded online, with partial points given for those that can only be traded by calling a live broker. Since long and short stock trading, as well as single-leg options orders are now standard, we don’t award points for those transactions.

Top marks in this category require:

• A large inventory of stocks that can be sold short, which is determined by the number of stocks on a broker’s easy-to-borrow list
• The ability to trade complex options
• The number of commission-free ETFs available
• The number of no-transaction-fund mutual funds available, as well as the overall number of mutual funds offered
• The ability to trade corporate and municipal bonds as well as treasuries, CDs and international debt
• Direct access to international markets
• A robo-advisory that is integrated into the brokerage platform. A robo-advisory that requires a separate login receives fewer points

This category evaluates the quality and accessibility of research, quotes and charting.

We looked for research, news and charting linked to a customer’s portfolio and watch lists; the quality of third-party research and its integration with the rest of the site; and the availability of screeners, with special emphasis on options screeners.

Top marks in this category require

• Stock screeners that can be customized and reused that generate actionable results, such as adding to a watchlist or opening an order ticket
• Fundamental and technical analysis
• Options idea generation features
• Mutual fund and fixed income screeners
• Powerful and customizable charting
• Level II quotes
• Analyst research
• Premium research, both proprietary and third party. Points deducted for research that generates an additional fee

This category evaluates how well traders and investors can monitor their successes and failures, to help them make better trades in the future.

Top marks in this category require:

• Clearly laid-out reports, updated in real time, showing current balances, positions and margin status
• Customizable portfolio-analysis reports with links to news and research
• Extensive transaction history
• The ability to beta-weight one’s portfolio or compare it to an index or customized indicator
• Tax reporting also falls in this category. Full credit is given for reports that can be created on the broker’s website, with no additional fees or data entry required
• Partial credit is awarded to brokers that populate services such as GainsKeeper and Maxit (tax analysis and reporting programs) for an additional fee

This category evaluates the process a customer goes through when something goes wrong, or when a customer needs some additional hand-holding.

Top marks in this category require:

• Online help that is easy to find and use. Context-sensitive help earns additional points
• The availability of live chat, user guides, and frequently-asked questions
• Short wait times for help on the phone
• The ability to visit a broker in person
• System capacity to handle trading surges
• Stock loan program, which lets customers who hold a stock long to loan it out to short sellers and generate income
• Offering portfolio margining

This category evaluates what brokers offer to help their customers get more comfortable investing in a variety of asset classes, as well as their security measures.

Top marks in this category require:

• High quality education offerings, both online and live
• Webinars, videos, and text that are organized into learning paths preferred
• Calculators and planning tools
• Two-factor authentication
• Security measurement statistics by third party evaluators.
• Strength of the passwords each broker required, and whether password changes are forced from time to time
• Use of biometric identification on mobile devices

This category evaluates the bottom line for using a broker’s platforms and services.

We compared commissions for stock and options trades and margin interest rates, giving more points for lower costs. We assumed stock/ETF trades of blocks of 500 shares, and two-legged options spreads of 5 contracts each. We scaled the points awarded so that the lowest costs in the group earned the maximum number of points, with fractions (and occasional zeros) given to the more expensive brokers. Stock and options commissions are the biggest factor here, but other transaction and service fees are also considered.

Full credit in this category can be earned by:

• Very low stock commissions
• $5 or less to trade 10 options contracts
• Mutual fund transactions below $10 for funds not on a no-transaction-fee list
• Margin interest rates below 4%
• Low (or no) fees for mandatory corporate actions
• No account maintenance or data fees

Our online broker rankings are based on all the information available at the time we performed our reviews. We concluded our findings on February 1, 2019. We realize that online brokers make platform adjustments, product improvements, and pricing changes continually, and the data we included in our review may change from time to time. We are in constant contact with the online brokers in our rankings to stay on top of their changes so that we can update our reviews.

As we state throughout our online broker reviews, all investors are unique and have varying needs based on their goals. We believe that our comprehensive review process covers those needs as thoroughly as possible given the information available to us at the time. While there will always be outliers, we are confident that we have applied the most useful methodology to review and rank online brokers according to the most popular use cases among online traders and investors.

We thank you for your trust.