While any brokerage should have a pretty decent description of what kinds of tools and resources their trading platform offers, sometimes the best way to assess platform quality is to give it a test drive. For brokers that allow you to open an account for free, it may even be worth the effort to go through the signup process just to access the trading platform if that’s what’s necessary.
Whether the brokerage has a web-based platform that anyone can access or a free downloadable platform that requires no-strings signup, do what you can to access the tools you’d actually use for free.
Even if you’re a more advanced trader, and there’s no free way to play around with “Pro” tools, you can get a good idea of the quality of a brokerage’s offerings just by looking at its basic suite. If there’s nothing in the standard platform that seems promising, it’s unlikely the advanced platform will be worth your time either.
On the other hand, some companies offer a huge array of tools and resources with their free products, so don’t write off brokerages with only one platform just yet.
We’ve already spent a good amount of time narrowing down your choices based on price and basic account offerings. Now that we’ve finally gotten to the fun stuff, make sure you spend time looking at the features available in multiple areas.
Go through the motions of placing a trade to see how smoothly the process operates. Pull up multiple quotes for stocks and other securities, and click on every tab to see what kind of data the platform provides. You should also check out any available screeners or other tools provided to help you find investments that meet specific criteria.
Questions to Answer While Testing Platforms
What types of securities can you trade on the platform? You should already have ruled out any platforms that don’t allow you to trade the securities you’re interested in. Make sure this platform automatically allow you to trade preferred shares, IPOs, options, futures, or fixed-income securities. If you don’t see particular security on the platform, but you know that the brokerage supports it, try looking in your account settings, or doing a quick search, to see how you can activate those features and learn about permission requirements.
Are quotes in real-time? Are they streaming? There will be multiple ways you can pull up a price quote for a given security, but not all of them will provide the most up-to-date data. Make sure you are aware of where you can find real-time streaming information to ensure your trades are well-timed. Vanguard’s web-based platform, for example, provides real-time data in its Ticker Profile pages, but it requires manual refreshing. Simple quote-level data is delayed by 20 minutes or more. Schwab’s online quotes also require manual refreshing, but the downloadable StreetSmart Edge platform and its cloud-based counterpart both offer real-time streaming data.
Can you set up customized watchlists and alerts? If you’re going to be a more active trader, you’ll likely want to be able to receive alert notifications via text, in addition to email, and set up multiple watchlists based on different criteria.
Does the platform provide screeners that you can customize to find stocks, ETFs, mutual funds, or other securities that meet your specific criteria? Even if you’re brand new and have no idea what any of the options actually mean, play around with the various parameters to get an idea of how easy the tools are to use. A good platform will be intuitively organized and easy to operate.
What kinds of orders can you place? Go through the motions of placing a trade and take a look at what types of orders are offered. A basic platform should offer at least market, limit, stop, and stop limit. A better platform will also allow you to place trailing stop orders, or market-on-close orders (which execute at the price the security reaches at market closing).
If you’re looking to make relatively few trades, and you’re not interested in day- or swing-trading, a basic selection of order types should be fine. If you’re looking to get into the nitty-gritty of stock trading, however, you should look for a wider selection. If you’re more advanced, you should look for the ability to place conditional orders that allow you to set up multiple trades with specific triggers that will execute automatically when your specified conditions are met.
Do you have control over order timing and execution of trades? A basic platform should at least allow you to place trades that are good-for-day (meaning they can be executed at any time during trading hours) or good-until-canceled (which keeps the order for up to 60 days until it is executed or you cancel it).
A more advanced platform will allow you to place limit orders with some more variability, such as fill-or-kill (which automatically cancels the order if it is not entirely filled immediately) or Immediate or cancel (which automatically cancels the order if it isn’t at least partially filled right away).
Can you trade in Extended Hours? Stock and ETF trades take place outside of normal market hours of 9:30 a.m. – 4 p.m. EST, the in pre-market and after-hours periods. Each brokerage has its own definition of the specific time periods these Extended Hours sessions occupy. For example, Schwab has Pre-Market trading beginning at 8 a.m., while E*TRADE’s Pre-Market session begins at 7 a.m.
Not all platforms allow you to trade during extended hours, and some only allow trading during after hours, but not during pre-market hours. You may be charged a fee for extended hours trading, so make sure you review the terms of those trades to make sure you aren’t caught unawares.
Again, for new investors, this feature may not be too important. For more advanced traders or those who are looking to be very active, however, reviewing a brokerage’s extended hours trading policy is crucial.
Now that you’ve played around with the platform a bit, take a look at the charting capabilities to explore the tools at your disposal. Pay attention to what kinds of data you can plot, how easy it is to switch between charting technical studies and reviewing fundamental or market data, and what you can customize and save for later reference.
What technical indicators are available on the chart? In general, the more the better. At the very least, you should be able to plot basic indicators like volume, RSI, simple moving averages, Bollinger bands, MACD, and stochastics. If any of these basic indicators are missing, it’s time to move on. You should also be able to plot at least a few company events, like earnings reports, stock splits, and dividend payments.
What follows is examples of two different technical menus. This one is a less-than-ideal option. Notice there is no way to plot volume:
This one has an amazing technical selection, which includes multiple options for each indicator type. It also allows you to plot fundamental data andhas a search function:
Can you compare different stocks and indices on the same chart?
Can you draw on the chart to create trend lines, free-form diagrams, Fibonacci circles, and arcs, or other mark-ups?
Does the platform have a trading journal or other means of saving your work? Whether you’re learning how to read charts or are a professional trader who takes notes to keep yourself on track, having a way to customize and store your charts is a hugely useful tool. Related questions include:
- In addition to creating trend lines, are you able to draw on the chart simply to highlight important events so you can remember what to review later?
- Can you save your charts after you’ve customized them?
- Can you make notes for later reference?
- Can those notes be placed onthe chart to make sure you know what they apply to when you look at it later?
Remember that some of these options may only be available on a Pro or Advanced platform. If you’re an advanced active trader, you’ll likely want a broker that offers all of these options. If you’re a more passive trader, or you’re just not looking to pay a premium for bells and whistles you’re not ready for, sticking to a free basic platform is just fine.
- Can you automate trades through customized rules or imported algorithms?
- Can the platform be customized to recognize specific chart patterns for prices, indicators, and oscillators?
- Can you set up alerts to notify you when the platform finds a matching pattern?
Does the website or platform allow paper trading? Paper trading is a way for investors to practice placing and executing trades without actually using money. It’s a great way for aspiring active investors to practice and for investors of all experience levels to test out new strategies and hone their skills without risking losses.
Does the platform allow backtesting? Another way to test out strategies and get comfortable with the process before putting cash on the line, backtesting allows you to simulate a trade based on the historical performance of your chosen security. It’s a way of placing a hypothetical, retroactive trade and then seeing what wouldhave happened had you executed it in real life.