Online trading of instruments like stocks, futures contracts, option contracts, bonds, funds and currencies had became very popular now. Now there a number of online trading brokers available who offer trading services for individual and institutional traders/investors. They offer traders access to different markets trading different products on a trading interface. The trading interface, known as trading software, can be accessible on web or can be installable. Market data and news are streamed through the trading software and traders make trading decisions with changing data (with or without the assistance of the broker).
According to the products available for trading, there are different types of brokers.
1. Online stock trading broker: Brokers who primarily offering brokerage services for trading stocks of companies and other stock exchange traded products.
2. Online forex trading broker: Brokers who allow traders to buy and sell currencies of different nations. Commission structure of forex brokers differ from others. Usually the trades are commission free and the brokers profit is the spread between ask and bid prices.
3. Online futures trading broker: Brokers whose primary service is for trading futures contracts on underlying products. The underlying product can be stocks, currencies, commodities, etc.
4. Online options trading broker: Brokers whose primary service is for trading options contracts on different underlying products including stocks, currencies and futures.
5. Online funds trading broker: These are brokers who allow traders to trade/invest in different mutual funds, ETFs, treasury notes, etc.
But most online brokers let traders to trade more than one product and market. The most prominent classification of online trading brokers is based on their services offered.
1. Full-Service brokers: These are brokers who offer trading advice, help in placing orders and offer a variety of orders and markets to trade on. In return of their service they charge high (often more than $50 for single stock trade). They need to be well-informed and very good in their customer support.
2. Discount brokers: These are brokers who charge discounted commissions (usually more than $15 for single stock trade). They do so by limiting their services and additional benefits. Usually traders wont get trading advice and help in placing orders and he/she have to make his trading decisions.
3. Deep discount brokers: These are brokers who offer lowest commission rates (from just $5 per stock trade). They are not suitable for all traders and are not necessarily good with their customer support. But there are some big names available among them.
For finding an online trading brokerage firm that best suit the trader, the trader should consider many things including his/her trading style, risk-tolerance, products and markets available for trading, commission charges, available order types, account minimums and benefits, past broker performance, accessibility, trading software, and additional benefits.