Value For Investors
Value For Active Traders
Commissions & Fees
Platform & Tools
A High Quality Online Brokerage firm that charges a premium for the quality. For traders looking for full service and convenience, ETRADE is an excellent choice. For traders looking for advanced trading tools and discounted commissions, they’ll have to look to Lightspeed or Interactive Brokers.
Hey everyone! Today we’re going to take a look at E*TRADE. I have a special place in my heart for E*TRADE because this is the platform I first used when I committed myself to full time trading. When I open E*TRADE Pro (the desktop application), I have flashbacks of the struggles I experienced as a new trader.
After about 2 years of trading there, I moved to Speedtrader, realizing hot keys and direct access routing would be critical for my success.
Although I no longer use E*TRADE as my primary trading platform, I still have account with them and I do feel there are some great benefits to using them. Today we’ll discuss the Pros and Cons of trading with E*TRADE.
E*TRADEwas formed in 1982 and calls itself “an online discount stock brokerage firm for self-directed investors”.
In this review we will question whether or not they are actually a discount broker by today’s standards, but in 1982, they certainly would have been discounted vs placing a order with a traditional stock broker.
The world of investing and day trading specifically, changed tremendously with the advent of the Internet and online trading.
The Internet has allowed part-time investors and traders to participate in the market without using a stock broker to place each order. E*TRADEwas one of the first businesses to capitalize on the online trading craze.
As technology has changed and improved, they have continued to develop and refine their trading platforms.
The current desktop platform allows Futures, Bonds, Mutual Funds, Indices, Stocks, and Options trading from the desktop of your computer.
They also offer a mobile trading app and a web portal to place orders through your browser.
- Full Service Brokerage Firm means bill pay, research tools, checkbook, credit card, etc.
- Very Convenient for funding and money transfer
- An intuitive and easy to use desktop platform
- Mobile Trading App is a big plus
- There is no direct access routing (you choose AUTO or pay extra to use NYSE/ARCA which isn’t ideal).
- Order execution isn’t as fast as competitors like Ligthspeed or Speedtrader.
- You can’t create hot keys for selling 1/2 and 1/4 position sizes.
- The charts aren’t very good quality compared with eSignal (check my eSignal review here)
My Experience with ETRADE & Why I left
From 2011 through early 2014 I traded actively with E*TRADE. The reason I funded an E*TRADE account was because it was a household name at the time. I needed a trading account and I knew of E*TRADE, Ameritrade, but few other brokers.
My initial experience with E*TRADE was that it was simple to use and easy to establish an account. For that reason I traded there for several years. During this time in my trading career I was trading a mix of small caps, penny stocks, and options.
Since I had such a mix of strategies I was actively trading E*TRADE was a perfect fit. The per trade commission structure also made it appealing for buying 50k-100k shares of penny stocks.
Ultimately when I began to focus exclusively on small caps and scalp trading, I needed a broker that could keep up with the speed I wanted to trade.
I was given the opportunity to open a Speedtrader account with a $2.95 per trade commission and made the switch. I haven’t looked back! If I were still actively trading penny stocks or options, I might consider keeping an E*TRADE account.
One of the draw backs of E*TRADE is the commission structure. They start at $6.95 per trade, which is not what I’d consider a discount broker in this day and age. Speedtrader at $3.95/trade, and Lightspeed or TradeKing at $4.95/trade are discount brokers.
Paying $6.95/trade is easily going to cost $100-200/day for an active day trader. Remember, $200/day is $52k/year.
That alone is a medium household income in the United States. Paying that just in commissions is going to be hard to justify unless you are making over $200k/year (most traders aren’t).
E*TRADE will negotiate with active traders down to a low of $4.95/trade if you exceed 30+ trades/quarter, which is more in line with the other discount brokers.
If you are looking for the cheapest broker, E*TRADE isn’t it. For those looking for more than just cheap, there are some great qualities to E*TRADE that could make it worth paying the extra commissions.
To trade at E*TRADE, you must register for an account. Currently, the company offers different plans designed for different investors and traders. Available account types include:
Brokerage – with this account, one can build their portfolio and have access to advanced trading and technical analysis tools. Account types available under brokerage include brokerage account, Coverdell Education Savings (designed to invest in your child’s future) and Custodial Account.
Retirement – planning for your retirement is the best decision you can ever make. Available account types include Traditional IRA, Roth IRA and Rollover IRA. With these accounts, you can save for retirement and take advantage of tax free growth potential and tax free future withdrawals.
Personalized Investments – get professional management for your personalized investments from E*TRADE Capital management. Available accounts include Core Portfolio, Blend Portfolios and Dedicated Portfolios.
By selecting one of the personalized investment account types, you can work with a financial consultant from E*TRADE Capital Management who will help you diversify your portfolio tailored to your investing needs.
Apart from that, they can help you build a custom portfolio which will be monitored and actively managed by professionals from E*TRADE.
Small Business Retirement – this type of account is designed for employers who can trade and offer retirement benefits to their employees. Available account types include SEP IRA, SIMPLE IRA, Individual & Roth Individual 401(k).
The SEP IRA account is designed for small businesses as well as self employed persons while SIMPLE IRA is a retirement plan that is similar to the 401(k). As an inexpensive plan, it’s designed for small businesses with less than 100 employees.
The biggest advantage of E*TRADE is certainly not the commissions, but the fact that it’s a full service brokerage. As a full service brokerage, they have some really great convenience features.
One of the cool things is that I could trade out of my 401k with them, use the bill pay system to take care of all my monthly bills, and I can even get a credit card and a checkbook linked to my brokerage account.
If I have a great day in the market I can celebrate with a nice dinner and charge the Credit Card.
However, if I am taking 10+ trades/day and not using a 401k account, it’s critical to look for a better priced firm to trade with.
If I were trading less frequently, using a 401k, or simply willing to pay for the convenience, E*TRADE is a great match.
I would also suggest traders spend a few minutes looking at TD Ameritrade as a similar full service brokerage. I personally prefer ETRADE to TD Ameritrade because I find the desktop platform more intuitive.