If you’re looking to day trade and trying to find a broker that can help you meet your needs, it is advisable to have a thorough look at the best options – and that is what we’re going to discuss in this post.
To help you choose an online broker that works best for your small trading account, we have reviewed these brokers with a focus on trading fees, account minimums, execution speed, education resources, research availability, trading tools and platform, as well as ease of use.
What is an online broker?
An online brokerage is a platform/firm that offers accounts that traders can use for trading financial securities, such as stocks, exchange-traded funds (ETFs), mutual funds, and bonds.
The accounts that brokers offer their customers are also known as taxable accounts since the profit made within them is taxed as a capital gain. If you set up an account with your broker, you can transfer money in and out of the account in the same way as a bank account.
Brokerage firms allow these accounts to be opened for an individual, more than one individual, or on behalf of persons under age 18.
Opening an online brokerage account
When creating a trading account with a broker, most brokers will require new clients to provide personal information, including legal name, date of birth, social security number, email address, and mailing address.
Your broker may also demand to know your employment status, trading objectives, trading experience, net worth, and annual income.
Best brokers for small accounts
TradeZero
Accounts features
- TradeZero account features: $500
- Commission: Charges zero commissions on most stocks and ETFs
- Securities offered: Stocks, options, ETFs, bonds, and warrants
TradeZero is a major brokerage firm that targets day and retail traders with small accounts.
This broker offers some of the most critical features that day traders consider when shopping for a broker, including zero-commission traders, an easy-to-use platform, and direct market access.
TradeZero is actually based in the Bahamas but has two units: TradeZero Bahamas and TradeZero America.
However, its American unit is fully licensed under the U.S. Securities and Exchange Commission (SEC) and FINRA so that it can observe the pattern day trader (PDT) rule, which requires U.S. traders to maintain at least $25,000 in their accounts.
The rule defines a “pattern day trader” as any trader who executes four or more “day trades” within five business days, so long as the number of day trades represent more than 6% of the trader’s total trades in the margin account during that same 5-business day period.
Why TradeZero stands out: In addition to offering a wide range of instruments to trade and advanced software, TradeZero is a leader in low-cost pricing for day traders and retail investors.
The minimum amount of funds you can deposit to get started on TradeZero is $500. This is a good figure for beginner traders. You can deposit bigger amounts as you go along. But, make sure you know how to make the most of your cash before trading bigger sums.
The maximum leverage offered by TradeZero America is 4:1 for an account balance above $25K. If account equity falls below that level, leverage falls to 2:1.
Clients can buy and sell securities with TradeZero America’s mobile app. It functions on Android and Apple phones and tablets.
Pros
- Low trading commissions and fees
- Offers a variety of instruments to trade
- Allows customers to trade stocks outside of the normal trading session
- Advanced charting tools and hotkeys
Cons
- Enforces PDT restrictions
- Mobile app offers limited features
Capital Markets Elite Group (CMEG)
Account features
- Account minimum: $500 for the Active Account; $2,500 for the Standard Account
- Commission per share: 0.004×Number of shares (minimum: $0.50 per ticket)
- Commission per share: $2.95 per trade (per ticket)
- Securities offered: stocks only
If you are looking for a way to bypass the PDT rule, CMEG could be your best pick. This offshore brokerage firm was founded in 2013.
Since CMEG is based outside the U.S., this means they are not under the PDT restriction. The broker is based in Trinidad and Tobago, meaning it is under the regulation of the SEC or FINRA.
However, this should not be a big cause of concern as CMEG is insured by Lloyd’s of London, a credible organization that has been operating for more than three centuries.
Why CMEG stands out: Should you trade stocks using CMEG? Yes, you should! This broker is a hidden treasure in the stock trading world.
To start trading on CMEG, you will need at least a minimum of $500 for 4:1 margin and a margin of 6:1 for any amount above $2,500. However, this doesn’t mean you should margin trade excessively on your small account unless you have enough experience and are fully aware of the risks.
CMEG also offers fast executions on trades. They also have editable hotkeys that are of significant benefit when trading volatile stocks or other securities.
Pros
- No PDT rule
- Start trading with just $500
- Zero commissions on stock trades in a Standard Account
- High leverage for accounts above $2,500
- Multiple software platforms
Cons
- Does not offer a lot of securities to trade
- Inactivity fees for both Standard and Active accounts
- Not regulated by the SEC
- High software fees can turn away less active traders
Bottom Line
Most day traders dream of having a huge trading account that has tons of leverage and all the whistles and bells. However, only a few of us begin to trade with a big account, and that’s totally okay.
Starting out with a small account will help you develop and sharpen skills that will prevent you from blowing up that account when it grows fat in the future.
So, don’t despair if you’re day trading on a small account. Almost everyone starts out small. Once the account gets big, you can add more positions and take more risks.
Utilize this part of your trading journey and one day, you’ll remember with a touch of nostalgia the time you could get in and out of a volatile stock trade throughout the day.