Choosing The Right Broker

One of the more popular questions I receive is simply which broker I recommend. Even though over the years I've tried out most of the well-known brokers, I use Tradestation for my trading account and Scottrade for my retirement portfolios.

That being said, I wouldn't simply recommend either of these brokers just because I use them. What is "right" for me and my situation, may not be "right" for you. In fact, my standard response when asked about this is to highly recommend that those who are thinking about switching brokers or opening up an online brokerage account for the first time is to pick three brokers which your research indicates are the best fit for you, your type of trading, and most importantly - your pocketbook. After one year, then choose one broker and stay with it. In fact, that's the process I used to make this decision several years ago and it didn't lead me wrong.

The problem, of course, is that which three brokers do you choose from the wide array that is available? Fortunately, I think Barron's provides a great starting point. I know when I was researching my choices, I found their research very useful. And, if you've been with a broker for a long time now and want to make the switch, I would advise against doing so just out of routine boredom or broker feature envy. In my experience, there is a great deal of benefit from sticking with a platform you know, even if it has shortcomings that annoy you. The last thing you need is to be unfamiliar or uncomfortable with any broker you choose. And, no matter what broker you choose, I've yet to see any correlation between investing/trading success with the type of broker. In fact, if I had to place a bet on it, I think the brokers who offer more advanced options generally experience lower net returns for their customers, even though I have no evidence to back up this assertion.