Review of Mark Minervini's "Trade Like a Stock Market Wizard"

Review of Mark Minervini’s “Trade Like a Stock Market Wizard”

One of my biggest trading influences was someone I met later in my trading journey.  It’s interesting who we meet along the way and the impact they have on us.  Mark Minervini isn’t just a great trader and phenomenal author, he’s also a genuinely good person who truly wants to help educate others and help them succeed in the market.  

For those of you who don’t know who Mark is, he is one of America’s most successful traders, is a 30-year veteran of Wall Street. He is the Author of # 1 Best Seller Trade Like A Stock Market Wizard; How to Achieve Superperformance in Stocks Mark has been featured in national media including Fox News, CNN, CNBC, Bloomberg, the Wall Street Journal, Barron’s, USA Today, BusinessWeek, and more. He won the US Investing Championship in 1997 with an annual return of 155% and has also been featured in Jack Scwhager’s “Market Wizards.”

Over the years I’ve built a personal relationship with Mark.  It started when I first learned of him and his work after reading about him in Jack Schwager’s Market Wizards series.  At the time I was already several years into my trading journey, had already read “How to Make Money in Stocks” by William O’Neil and was deep within that universe.  Mark’s take on the markets, trading, and how to be successful breathed new life into what I thought I knew.  His ideas were akin to what I had learned from CANSLIM and Investor’s Business Daily.  This fresh perspective enticed me to read his book “Trade Like a Stock Market Wizard: How to Achieve Super Performance in Stocks in Any Market“.

I started following Mark on Twitter.  We wrote back and forth for quite some time.  He later agreed to answer a dozen questions in great detail straight from the ChartYourTrade Community (you can read that interview here).  We eventually met up at the Waldorf Astoria in NYC and went to a juice bar a couple of blocks away.  Later on, he even gave a special presentation to us at the NYC Investor’s Business Daily meetup.  This gave me one of my more useful risk management tactics… using bracketed stops.

 

I learned quite a bit from “Trade Like a Stock Market Wizard”.  Here are some of the highlights:

 

Knowledge is the fusion of information over time…

“All you have learned and the experience you have gained can bear fruit for many years to come… truly this is what makes acquired knowledge and firsthand experience the greatest tool to succeed and build upon in stock trading and in life.” 

This is extraordinarily true and as I reread excerpts and highlights from the book, things make far greater sense and have a fresh perspective today more so than they did years ago.  It is true…we never step in the same river twice!

 

Stop focusing on the money!

“For me, the greatest success came when I finally decided to forget about the money and concentrate on being the best trader I could be.  Then the money followed.”

This is something that literally took me YEARS to fully grasp.  I mean, the reason why most of us gravitate to the stock market IS to make money… One of the true ironies of the market is that we finally begin to find success after we stop focusing solely on making money and start focusing on the elements that make us the best trader we can be.  Those two things are not the same. 

 

Clearly define your style with clearly stated goals

“The average trader spends the majority of his or her time vacillating between two emotions: indecisiveness and regret.  This stems from not clearly defining one’s style.  The only way to combat paralyzing emotions is to have a set of rules that you operate from with clearly stated goals.  You simply must make a decision: Are you a trade or an investor?”  

RAISE YOUR HAND IF YOU’VE EXPERIENCED THIS!  …both of my hands are in the air!

In the beginning, you need to focus.  You need to find yourself.  This is something else that took me years to grasp and I experienced this vacillation for years!  The one thing that finally got me over this hurdle was separating my accounts.  I now have separate dedicated accounts for my short-term, intermediate-term, and long-term ideas.  

 

A Step By Step Process…

Mark shares his entire process step by step in this book.  I greatly enjoyed this part of the book.  For me personally it confirmed much of what I was already doing.  I was fascinated by and thrilled to learn that his style was very similar to my own.  Running consistent scans, focused scans, seeing what pops up on multiple scans, filtering down for only the best ideas, running overlay screens, executing trades only at the point of alignment across the spectrum with regard to the company fundamentals, stock price, and volume activity as well as overall market conditions.

Some of the larger points of Mark’s process that stuck out for me include:

  • Finding the exact entry point “SEPA” or “Specific Entry Point Analysis”
  • The Fundamental criteria that actually matters
  • Leading industry groups and sectors
  • Companies with rapid growth in a rapid sector… that are in a sense gaining market share in two ways 
  • Purchasing turnarounds
  • Anticipating news and why stocks often move in the opposite direction after the news is released
  • Risk Management

 

After reading Mark’s full process, the most important takeaway for me in this book is still the part that is common to practically every other book I’ve read about stocks, business, or success in general told in Mark’s own unique way… it’s about mindset!  In order to succeed, we must have the right mindset, we must put in the work, we must understand that we are on a long journey.  What we are looking to achieve is possible, but its a marathon, not a sprint.  

In the early stages of my trading journey and even now, this book is extremely valuable.  Again, you never step in the same river twice…  

 

Some other posts you may enjoy:

TRADING VIEW REVIEW

TRADING VIEW REVIEW: 4 Ways it Has Helped me AUTOMATE

If you’ve watched any of my recent YouTube videos, you’ve likely seen TRADING VIEW.

TRADING VIEW is the charting service I use. I like them for a LOT of reasons.  In this Trading View Review, I’m going to share what I love about them, where it’s lacking and how I’ve dealt with it, and some key features to help you automate within the platform if you have it.

Top 3 things I LOVE about Trading View

1. EASE OF USE

It is very easy to annotate charts, view multiple time frames, journal, build watch lists, and publish to social channels.  Check out the video above.  I spend a few minutes on how I do each of these.

2. IT’S CHEAP:

A Pro Membership only costs $9.99/month! Before I found Trading View, I was paying about $150/month for charts and scanning software.  Now, Trading View does have a scanning component but it’s not something that I’ve found very useful.  I now use ChartYourTrade MRI to quickly scan for high-quality growth stocks.  You can read all about the various ways I scan for stocks, the parameters I set, some ways to do it for FREE or if you want to save time and spend just a little, some resources you can use.  Click here to read “How to Scan for the Best Growth Stocks.”

3. AUTOMATION:

They allow users to write what they call “Pine Scripts”. You can basically create any indicator you can dream up and add it to your charts!  This is perhaps the BIGGEST REASON why I LOVE Trading View.  One of the things I would do manually in that really expensive charting service I mentioned earlier was flag distribution days on the indexes.  So I would go 

One of the things I would do manually in that other really expensive charting service I used to have was flag distribution days on the indexes.  So I would go into each index, calculate if a distribution day had occurred, get the clunky annotation tool, and flag the day.  I’d do this on the S&P 500, NASDAQ, and NYSE… doing this every week would really only take 5 or 10 minutes… BUT IT ADDS UP!  20-40minutes per month…I can think of better ways to spend that time. 

Trading View is able to BOTH automatically flag distribution days AND keep a tally of the distribution days over a set period!  In keeping within the CANSLIM trading methodology, I’ve set mine up to 25 days.  The great thing about Trading View, you can get these codes and do whatever you want with them!  The customization is incredible!

 

CLICK HERE TO GET TRADING VIEW NOW

 

HERE ARE MY 4 FAVORITE AUTOMATIONS (and the codes I use for them)

Just copy/paste the entire code into the “pine editor” and save them. Follow the steps I use in the video…

1. RELATIVE STRENGTH (vs the S&P 500)  

study(“Relative Strength”, shorttitle=”RS”)
a = tickerid
b = input(“SPX500”, type=symbol)
as = security(a, period, close)
bs = security(b, period, close)
plot(as/bs, title=”Relative Strength”, color=gray)
len = input(30)
plot(sma(as/bs, len), color=navy)

2. DISTRIBUTION DAYS

//@version=2
study(“Distribution Days”, overlay=true)
is_down_bar = change(close) < -0.02 ? true : false
is_volume_up = change(volume) > 0 ? true : false
is_distribution = is_down_bar and is_volume_up ? true : false
plotshape(series=is_distribution)

3. DISTRIBUTION DAY COUNT

study(‘Distribution Day Count’ )
is_down_bar = change(close) < -.2 ? true : false
is_volume_up = change(volume) > 0 ? true : false
is_distribution = is_down_bar and is_volume_up ? true : false
sum = sum(is_distribution, 25)
plot(sum)

4. NEW HIGHS vs NEW LOWS on NYSE

study(“[RS]jangseohee NYSE – NHNL Indicator V0”)
timeperiod = input(“D”)
NH = security(“HIGN”, timeperiod, close)
NL = security(“LOWN”, timeperiod, close)
plot(NH, color=green, style=columns)
plot(-NL, color=maroon, style=columns)

showvectorchannel1 = input(true)
showvectorchannel2 = input(false)
showvectorchannel3 = input(false)
showvectorchannel4 = input(false)
showvectorchannel5 = input(false)

topvc1 = NH[2] < NH[1] and NH[1] > NH[0]
botvc1 = NL[2] < NL[1] and NL[1] > NL[0]

topv1 = topvc1 ? NH[1] : na
botv1 = botvc1 ? -NL[1] : na

plot(showvectorchannel1 ? topv1 : na, color=silver, offset=-1)
plot(showvectorchannel1 ? botv1 : na, color=silver, offset=-1)

topvc2 = topvc1 and valuewhen(topvc1, topv1, 1) < topv1
botvc2 = botvc1 and valuewhen(botvc1, botv1, 1) > botv1

topv2 = topvc2 ? NH[1] : na
botv2 = botvc2 ? -NL[1] : na

plot(showvectorchannel2 ? topv2 : na, color=gray, offset=-1)
plot(showvectorchannel2 ? botv2 : na, color=gray, offset=-1)

topvc3 = topvc2 and valuewhen(topvc2, topv2, 1) < topv1
botvc3 = botvc2 and valuewhen(botvc2, botv2, 1) > botv1

topv3 = topvc3 ? NH[1] : na
botv3 = botvc3 ? -NL[1] : na

plot(showvectorchannel3 ? topv3 : na, color=black, offset=-1)
plot(showvectorchannel3 ? botv3 : na, color=black, offset=-1)

topvc4 = topvc3 and valuewhen(topvc3, topv3, 1) < topv1
botvc4 = botvc3 and valuewhen(botvc3, botv3, 1) > botv1

topv4 = topvc4 ? NH[1] : na
botv4 = botvc4 ? -NL[1] : na

plot(showvectorchannel4 ? topv4 : na, color=black, offset=-1)
plot(showvectorchannel4 ? botv4 : na, color=black, offset=-1)

topvc5 = topvc4 and valuewhen(topvc4, topv4, 1) < topv1
botvc5 = botvc4 and valuewhen(botvc4, botv4, 1) > botv1

topv5 = topvc5 ? NH[1] : na
botv5 = botvc5 ? -NL[1] : na

plot(showvectorchannel5 ? topv5 : na, color=black, offset=-1)
plot(showvectorchannel5 ? botv5 : na, color=black, offset=-1)

 

Check out some of our other blog posts:

The Trade Risk Review: Made Some Money with New Trading Techniques

What is “The Trade Risk”?

the trade risk reviewTheTradeRisk.com is a stock trading service run by friend and colleague Evan Medeiros.  The service provides you with daily trade alerts on high momentum stocks.  He tells you precisely when he’s getting into a trade and when he is getting out of a trade. 

He takes this service a step further by providing you with weekly recap videos (about 20 minutes long on average) where he walks you through each trade, explaining the rationale behind it.  

 

How I discovered “The Trade Risk”

Evan and I met at Stocktoberfest 2014.  Over a beer, we discussed the market and what trades we were interested in at the time.  As it turned out, our process for finding high-quality growth stocks was very similar and we often traded the same setups.  In fact, we even took the same entry point on BABA on the same day and got the same fill price!  

Our strategies for managing the trade turned out to be a bit different.  Most of my trades tend to be held from weeks to months at a time whereas most of Evan’s were held for a few days at the most.  He isn’t a day trader.  Rather he is a shorter term momentum based swing trader.

We both made money on this trade and we are both successful traders.  However, our trade management styles are slightly different.

How I Made Some Money Using “The Trade Risk”

Toward the end of the year Evan and I were talking on Twitter and we started to discuss his trading service “The Trade Risk” and how things were going.  He told me all about the service and I thought that it may be a very good fit for some of you.  I agreed to test it out for 6 weeks, put it through its paces, and see if it was worth sharing with you.

As part of the trial, I asked Evan to make sure I was treated exactly the same as everyone else and received no special treatment.  

The service is pretty straightforward:

  • Trade alerts sent straight to your phone as they happen
  • You receive exact entry points and exit points
  • Every weekend there is a wrap-up video that is about 20 minutes long.  Evan walks you through the trades step by step

I took each of the entries and exits that Evan suggested and walked away making a little over 1R for the 6-week trial.  Not bad considering the choppy environment!  

For those of you not familiar with the work of Van Tharp, “R” stands for Risk.  He views each individual trade as making a multiple of the amount you risked.  For example, if you risked $100 and made $150, you would have made 1.5R.  

I typically risk 1% of my capital on every trade so over the 6-week trial, my portfolio was up about 1%.  

For all of 2016, Evan was up 14.08R (if you risk 1% on every trade, you’d be up about 14% less transaction fees).  

His biggest winning trade was up 3.73R 

His biggest losing trade was down -1.65R

There were 157 trades in total. 

New Trading Techniques Learned from The Trade Risk

One of the great things I like about Evan’s service is that like any good trading service, he provides open email access and typically responds to all emails within 48 hours (at one point during the trial Evan was traveling across the country and STILL managed to respond to an inquiry in a timely manner).  

Selling on the Way Up

As mentioned earlier, Evan and I go about finding high-quality growth stocks in a very similar way but we go about managing them differently.  He likes to sell into strength and take pieces off on the way up.  Selling into strength has always been challenging for me so to see him do it in real-time was very helpful.  

Counter-Trend Trades and Buying the Dip

Evan is also very good at picking up counter-trend trades and reversals off of a support area.  If he is wrong, he is often out in a hurry and very seldom loses the full amount.  (His biggest loss during my trial was -0.48R).  Again, “buying the dips” is something that is often easier said than done.  Watching him do this in real-time was a good learning experience.

A few caveats…

While I really enjoyed Evan’s “The Trade Risk” service and definitely recommend it, I don’t think that it is for everyone.  Here is who I think the service is NOT for:

  • Someone who is NOT an active trader.  Most of the trades I was in with Evan lasted less than a week.
  • Someone with a small account AND/OR has a broker with high transaction fees.  Keep in mind that 2016 generated 157 trades with at least 314 entries/exits.  I say ‘at least’ because Evan likes to scale out of trades.  If you’re paying $10/trade you’d have at least $3,140 in transaction fees last year.  

The bottom line…

During my 6 week trial, I enjoyed Evan’s “The Trade Risk” service quite a bit, learned a lot, and made some money.  Despite the caveat above regarding small accounts, I was able to make the service work WITH a tiny account that I have with Robinhood because they have $0.00 transaction fees.  If this is you as well, you may still want to give The Trade Risk a try.

10 Tips and Tricks for Trading Stocks Successfully

There are a lot of gadgets and gizmos, tools and software, and tips and tricks out there in the marketplace designed to help you trade stocks successfully.  Today we want to focus 10 Tips and Tricks and our single favorite tool that will help you become a more successful trader.  These tips and tricks can be used with any style of trading and can even be used in other industries and businesses!  

In the following post, we’ll show you how to:

  • How to access our favorite tool “ChartYourTrade MRI” on desktop and mobile
  • How to use the various scanners within the ChartYourTrade MRI scanner
  • How to pull up charts
  • How to export lists and reports to Excel
  • How to effectively use Industry Group reports
  • How to create heat maps in Excel
  • How to track and analyze the number of New Highs vs New Lows being made on the NASDAQ and NYSE
  • How to create simple area charts in Excel
  • How ChartYourTrade MRI’s scan results can help you gauge the market’s health
  • How to create simple bar charts with moving averages in Excel

 

Accessing ChartYourTrade MRI

STEP 1: Make sure you are logged into ChartYourTrade

STEP 2: Opening up ChartYourTrade MRI on Desktop… 2 ways to do it

OR

** Opening ChartYourTrade MRI on MOBILE **

 

How to use the various scanners within the ChartYourTrade MRI scanner

Once you open up ChartYourTrade MRI, you’ll be brought straight to the scanner. Here is where you can run all 8 of our custom designed scans AND run the “Ideal Growth Stock Screen” over the results.   See screen shots below…

For more on each of these 8 scans and what they’re comprised of, checkout our post How to Scan for the Best Growth Stocks.  At the time of this writing, there are 61 stocks passing “All Scanners” with the Ideal Growth Stock Screen set to 50%. You can track the expansion and contraction of this list week to week and gauge the underlying health of the market. As the list expands, the market internals “under the hood” are getting stronger. As the list contracts, the internals are starting to get weaker.

You can roll your mouse over any of the ticker symbols and pull up the weekly chart.

You may also export this list to Excel (or a CSV document) and upload the list to your favorite charting service. I prefer Trading View.

So that’s the basics of using the stock scanning tool in ChartYourTrade MRI. Pretty simple, right? Select which scans you want, select the percentage by which they should pass the “Ideal Growth Stock Screen”, click “Submit” and boom, your scanning is done! Done manually, this process used to take me a few hours each weekend using expensive software.  Now it’s done with one click!

 

How to use the built-in Industry Group reports

One of the things that lead to my trading success was being able to identify broader themes in the market. Stocks often travel in packs. They say “birds of a feather flock together”…well, the same is true of stocks! When multiple stocks from the same industry group begin passing our scans simultaneously, it’s a sign that something is happening within that industry group and it warrants us to take a closer look at the stocks within that group. Often we’ll see several stocks within that group setting up in similar basing patterns. When this happens, it could be signaling a group move. If that’s the case, hang on to your hats!

First things first, here is how you access the industry group reports…

STEP 1: Open up ChartYourTrade MRI

STEP 2: Click Reports

STEP 3: Select the date you’d like to compare to the current week (the most up to date data is made available on Sundays so presently, you can only select Sunday dates to compare)

You can sort the columns by clicking on the column header. You can also export this report to Excel or to a CSV document.

 

How to create heat maps in Excel

**Here’s a trick I learned a while ago to quickly size up industry group moves**

Every week I export this list to Excel and keep a running tally of the lists from week to week to week and create an Industry Group Heat Map. This takes all of about 2 minutes to do each week which includes both general formatting and conditional formatting. I use conditional formatting over the lists to show dark green for the higher numbers and fade down to red for 0. This produces a heat map and at a glance I can see industry group rotation! Check out the screen shot below…

Here we can see that Regional Banks made a big splash in early April seemingly out of nowhere! That was our first clue that we should begin investigating this group. The following week, 2 more stocks were added from this industry group and suddenly, it was tied for the being the industry group with the most stocks passing our scans. 

Here’s a list of the stocks in the Regional Banks Industry Group that passed that week: BANC, CIB, FCB, GWB, HQY, and SFBS. Go check out their charts! Almost all of them were setting up in highly constructive, actionable base patterns! This happens again, and again, and again!

Here is how to do Conditional Formatting in Excel

I’m on a Mac but the steps are VERY similar on PC. The only thing that is slightly different are where buttons are placed.

STEP 1: Highlight all of the data you want to be formatted and then click “Conditional Formatting”

STEP 2: Click “color scales” and then click the option with green on the top and red on the bottom.  This will make the bigger numbers green and the smaller numbers yellow and zero will be red.

STEP 3…there is no step 3! You’re done! Yes, it was THAT simple!

 

How to track and analyze the number of New Highs vs New Lows being made on the NASDAQ and NYSE

Studies have shown that 3 out of every 4 stocks will follow the broader trend of the market (i.e. the major indexes). It is therefore imperative that we have a robust way of determining market health.

A key factor that I have found in determining market health is analyzing the number of New Highs vs New Lows being made on both the NASDAQ and on the NYSE. The reason I have selected these 2 indexes is because the vast majority of the high quality growth stocks I’m interested in is trading on one of them.

The reason why analyzing the number of new highs vs new lows is so important is pretty straight forward… We know that most stocks will follow the overall trend of the market. The major indexes are simply a composite of the stocks within them. THEREFORE, in order for the indexes to continuously make new highs, there must be an abundance of stocks within them making new highs as well. Additionally, with the indexes marching higher, we would expect to see very few, if any, stocks making new lows. 

By monitoring the New Highs vs New Lows list every day or even every week, we can see how robust the market’s trend truly is and if it is about to change! I’ve personally captured numerous trend changes through this sort of analysis.

Here is how to access the New Highs vs New Lows Reports

STEP 1: Open up ChartYourTrade MRI

STEP 2: Click NHNL in the upper left

STEP 3…there is no step 3! Your New Highs vs New Lows are right there and are archived going back to when we launched ChartYourTrade MRI back in March of 2015.

 

How to create charts of the New Highs vs New Lows in Excel

This is another task that is super easy that you can do in just a couple of minutes. The results will be a long term chart that allows you to easily see a potential change in the trend of the market BEFORE it happens.

STEP 1: Copy/Paste the New Highs vs New Lows Report into Excel

STEP 2: Multiply each “new lows” column by -1 and then paste the results over them. This will be important in creating your chart. I find it far easier to read the new high and new low values if they’re separated with the new lows being negative. 

STEP 3: Creating a chart for the NYSE. Highlight the data in columns A, B, and C. Click charts, then Area, then the 2D chart that says Area. Doing this will quickly produce the chart below. The new highs are in blue and the new lows are in red. As market health improves, you will see a dry up in new lows and an expansion in new highs. Conversely, as market health deteriorates, you’ll see a dry up in new highs and an expansion in new lows.

STEP 4: Creating a 2nd chart for the NASDAQ: follow the steps in step 3. After that, click into the new chart. You’ll see the data the chart is pulling highlighted. Click, hold, and drag the box that is around columns B and C for the NYSE, over to columns D and E for the NASDAQ. This is the easiest way to make the chart for the NASDAQ. 

In general, the charts for both indexes will look very similar. However, on occasion they will diverge. When they diverge, I’ve typically seen choppiness, volatility spikes, and sideways price action in the markets. Again, the New Highs vs New Lows reports tends to be a leading indicator and does a fantastic job at helping us gauge the overall health of the market.

 

 

How ChartYourTrade MRI’s scan results can help you gauge the market’s health

As mentioned earlier, the results of the ChartYourTrade MRI Scanner naturally ebb and flow with the market.  As more and more stocks pass our scans, the overall strength of the market is improving.  Conversely, as fewer and fewer stocks are able to pass our scans, its a sign that market conditions are deteriorating. As such, the ChartYourTrade MRI Scan results can be used as a both a leading indicator, as well as a lie detector!

Part of the reason why the results expand and contract each week is that some of the scans are momentum based scans such as stocks making new 52 week highs and the Relative Strength scan. These scans are highly sensitive to the prevailing market conditions. Since the ChartYourTrade MRI Scanner is designed to hunt for the best of the best growth stocks, seeing the results expand and contract each week tells us how the market is currently treating growth stocks.

Below are screen shots of the results of ChartYourTrade MRI when run with All Scans and with the Ideal Growth Stock Screen set to 50% vs the S&P 500 over the same time period. The black line on the “CYT MRI: Expansion/Contraction” chart is the 8 week moving average. I’ve chosen the 8 week so it is reflective of the past 2 months of data. 

Let’s take a look at the screen shots below…

During the first week of January, we see our first major drop in the CYT MRI results. 4 weeks later, the CYT MRI results bottomed at 23 and then surged to 31 the following week…a week BEFORE the S&P 500 started to rally off the lows. 

On April 8th the scanner results peaked at 66, the most for 2016 as of this writing. This occurred just BEFORE the S&P 500 attempted to breakout the week of April 18. From there we see a steady decline in the number of stocks passing the CYT MRI and the market proceeded to chop around, violently at times. 

After the BREXIT shakeout the week of June 20, the S&P 500 began a massive rally. The CYT MRI results spiked on July 8th giving further confirmation that the rally was for real!

You can use ChartYourTrade MRI as a gauge for market health and build the chart above quite easily.

 

How to create simple bar charts with moving averages in Excel

STEP 1: Open up Excel and record the results of the number of stocks passing the CYT MRI scans each week (you can find out prior weeks scans by totaling the Industry Groups Report) 

STEP 2: Highlight your data and select charts, column, and 2-D column “clustered column”

STEP 3: Click in the chart and “right click” on any of the columns.  That should bring up the window shown below. Click on “add trendline..”

STEP 4: Click “moving average” and change the period to 8

And that’s all you have to do to create this extremely useful chart. Once you have the chart created, you can add to it each week and you’ll have this done in under a minute. Not bad for something that can help us gauge market health like this, right?

If you haven’t tested out ChartYourTrade MRI yet,  try it out now for free for 30 days!  Sign up here.

3 Great Low Fee or NO FEE Online Stock Brokers

online stock brokersSearching for online stock brokers can be daunting especially when you’re just starting out.  With so many brokers to choose from and each one touting what their idea of the “must have” bells and whistles are, it’s easy to become overwhelmed.  

Fortunately from our experience there are very few “must haves.”  In fact, you can count them on one hand!  Here are our must haves:

  1. Low Fee or No Fee (yes, no fee exists and we will get to that in a second)
  2. Reliable Platform
  3. Easy to Use Interface

That’s really about it.  We could have included customer service on the list of must haves but we feel that so long as the broker provides a reasonable minimum level of customer service it’s acceptable.  The 3 brokers we’ve listed here do just that.

Why is our list of must haves so short?

The reason why our list of “must haves” is so short is because the only thing you really need a broker for is to execute your orders.  Most of the tools and services higher priced brokers can easily be found elsewhere either for free or at relatively low cost.  Just check out our “Start Here” page and we’ll point you in the direction of a ton of great free info.  Why pay higher commission fees on every trade you place for “must have” features that you can easily find elsewhere and save a bundle? 

 

3 Great Low Fee or NO FEE Online Stock Brokers

So who are some great low fee or no fee online stock brokers?  Here are 3 of our favorites.  None of them are perfect but we’ll go through the pros and cons of each.

  1. Robinhood (no fee)
  2. Interactive Brokers (low fee)
  3. Options House (low fee)

screen-shot-2014-02-27-at-9-46-37-amRobinhood

Yes, you read that correctly.  Robinhood is a no fee online stock broker.  How do they do it?  Is it a scam…?  Not at all!  Click here to learn more about Robinhood and how they’re able to offer this.

Pros

  • Free (doesn’t get any cheaper than that)
  • No minimum deposit (great for beginners)
  • Easy to use Mobile platform on iOS and Android
  • Reliable order execution (trades go through immediately)
  • Great for beginners

Cons

  • No desktop version (if you don’t have a smart phone, you’re out of luck)
  • No margin (you are not able to short a stock)
  • No Option Contracts
  • No phone support (email only)

interactive-brokersInteractive Brokers

Interactive Brokers is great for traders and investors who have a little bit of experience, know the lingo, and don’t mind a poor desktop user interface (UI).  I’ve tested a number of brokers and Interactive Brokers desktop UI is among the worst.  Thankfully, however, their mobile platforms more than make up for it.  Order execution is a dream.  You can trade just about anything: stocks, ETFs, options, forex, futures, metals, etc…  AND outside of Robinhood, they have the lowest commission fees around!

Pros

  • Low Commission Fees: $1/trade for stocks
  • Easy to use mobile platforms
  • Trade Anything
  • Reliable Order Execution
  • Good customer support (phone and live chat)

Cons

  • $10,000 minimum deposit
  • Terrible desktop platform

optionshouse-logoOptions House

Options House has an extremely intuitive and easy to use desktop User Interface (UI).  They are fairly low cost at $4.95 a trade.  However, $4.95 a trade is about the most I would tolerate. If you trade on an intermediate time frame (holding periods of weeks to months) transaction fees can eat into your profits in a hurry.  For example, for every trade you make you have both a $4.95 fee to enter and a $4.95 fee to exit.  If you have 100 trades a year that is $990.  Now if we compare that to some other brokers (E-Trade charges $7.99/trade, $14.98 to enter and exit, $1,498 for 100 trades a year) it’s not bad.  But if you can deal with a poor desktop platform from Interactive Brokers or only trade from your phone and stick strictly to buying stocks with Robinhood, you could save yourself quite a bit by the end of the year.

Pros

  • Clean, easy to use desktop platform
  • Easy to use mobile platforms
  • Trade stocks, options, ETFs, and Futures
  • Reliable Order Execution
  • Good customer support (phone and live chat)
  • Relatively low commission fees at $4.95/trade for stocks
  • $1,000 minimum deposit for cash account, $2,000 minimum for margin

Cons

  • More expensive than Robinhood and Interactive Brokers

 

What’s your favorite online stock broker?  What are your “must have” features?  Let us know by leaving a comment below…

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