Discount Brokers Key Terms

Learn terminology used in the world of discount brokers

By Felicia R. Blue

Investors and traders trade with discount brokers because their commissions are much less than full-service brokers. However, discount brokers don't provide investment advice, such as advising clients on what stocks to purchase. Traders and investors must conduct their own research, such as finding out the company's profits or earnings per share; they can obtain this information through online discount brokerage firms. Here are a few terms investors and traders need to understand when it comes to discount brokers.

Discount brokers

Discount brokers offer lower commissions than full-service brokers. As previously stated, they usually buy and sell stocks without providing investment advice to clients. Discount brokers provide investment research information about companies.
Try: Investor Words gives an explanation of discount brokers.

Commissions

Commission is the fee that the broker charges clients for executing trades. Professional traders and investors usually prefer discount brokers because they charge lower and flat-rate commissions.
Try: The Sun Financial Diary not only talks about discount brokers, but compares the commissions they charge.

Full-service brokers

Full-service brokers provide services such as financial planning and investment research. They can also advise clients on what stocks to buy and sell. However, the client will usually make the final decision on what to buy or sell. In addition, full-service brokerage firms might charge a yearly maintenance fee.
Try: AOL Money & Finance provides in-depth information about why discount brokers are better than full service brokers.

Trading

Trading involves buying and selling securities. Discount brokers offer versatile trading, in that investors and traders can trade not just stocks, but options, commodities, bonds, and mutual funds. Investors and traders can also trade international securities through discount brokers.
Try: Visit Interactive Brokers to learn about the different securities investors and traders can trade.

Trading platform

Trading platform is software that discount brokers allow investors and traders to use to execute trades. The trading platform includes charts and real-time prices on companies. Investors and traders are able to see what the bids and asks are for securities. They can employ trading strategies, such as trailing stops.
Try: Go to Apex Futures to learn what its trading platform offers.

Discount brokerage account

Opening a discount brokerage account requires the investor or trader to fill out an online application. The person can also mail in the application. After it has been approved, then the person can deposit cash in the account and begin trading.
Try: Motley Fool provides good information about how to open an account with a discount broker. You will need to scroll down this page to get to the discount brokers section.

Discount Brokers Key Terms

Learn terminology used in the world of discount brokers