Which Broker is Better for Short Selling: Ameritrade or E*TRADE?
When it comes to trading, the right broker can make all the difference. With the vast array of online brokers available today, it's essential to identify the one that best suits your specific needs, especially if you're looking to engage in short selling. In this article, we'll delve into the details of two popular brokers, Ameritrade and E*TRADE, and compare their features to help you decide which is the better choice for short selling.
Understanding Short Selling
Before we dive into the comparison, it's important to have a basic understanding of short selling. Short selling involves borrowing shares from a broker and selling them with the expectation that the price will drop. You can then buy the shares back at a lower price, return them to the lender, and keep the difference as profit.
Ameritrade: A Comprehensive Overview
Ameritrade, now known as TD Ameritrade, has been a trusted name in the brokerage industry for a long time. What makes Ameritrade stand out for short sellers is its extensive range of services, including robust trading platforms and excellent customer support.
Trading Platforms and Features
Ameritrade offers several trading platforms, each designed to cater to different types of traders. However, for short selling, the key platform to focus on is its flagship service, Thinkorswim. Thinkorswim is known for its advanced charting tools, real-time margin calls, and comprehensive market data, which are crucial for short sellers.
Commissions and Broking Fees
At Ameritrade, the commission structure is competitive, with no fees on intra-day trades for customers with accounts worth $25,000 or more. This can be particularly advantageous for short sellers who may engage in frequent trading.
Marginal Interest Rates
Ameritrade offers favorable margin interest rates, especially for customers with larger account balances. For instance, customers with an account balance of $100,000 or more might enjoy a lower interest rate on borrow fees. Lower margin interest rates translate to greater profitability for short sellers.
E*TRADE: A Review
E*TRADE is another well-known broker that has gained significant popularity due to its user-friendly interface and comprehensive suite of features. Short sellers looking to use E*TRADE would benefit from its wide range of tools and services designed to support various aspects of trading.
Trading Platforms and Tools
E*TRADE offers a user-friendly trading platform that is intuitive to use, making it accessible even for new traders. The platform includes advanced charting tools, real-time news, and financial analysis, which are vital for short sellers. Additionally, E*TRADE's mobile apps ensure that you can stay in the game no matter where you are.
Commissions and Broking Fees
E*TRADE's commission structure offers competitive rates, with no fees on trades involving cash or margin accounts. For short sellers, this can be a significant advantage, as it minimizes the cost of executing trades.
Marginal Interest Rates
While E*TRADE does not offer as low margin interest rates as Ameritrade, it still offers reasonable rates for customers with larger accounts. However, the margin interest rates may be higher compared to Ameritrade, which can impact profitability for short sellers.
Differences and Considerations
The key differences between Ameritrade and E*TRADE lie in their platforms, commissions, and margin interest rates. While E*TRADE's user-friendly interface might be more appealing to new traders, Ameritrade's advanced features and lower interest rates can be more beneficial for experienced short sellers.
Conclusion
In conclusion, when deciding between Ameritrade and E*TRADE for short selling, consider your trading habits and account size. If you are an experienced trader who requires advanced features and lower margin interest rates, Ameritrade may be the better choice. On the other hand, if you are a beginner who seeks a more user-friendly interface, E*TRADE could be more suitable. Regardless of your preference, both brokers offer excellent services, but the choice ultimately depends on your specific needs and trading style.
Frequently Asked Questions
Q: Is margin trading available with both Ameritrade and E*TRADE for short selling?
A: Yes, both Ameritrade and E*TRADE offer margin trading facilities for short selling. However, the terms and conditions, such as margin interest rates, may vary.
Q: How do the commission structures differ between Ameritrade and E*TRADE?
A: Ameritrade offers no fees on intra-day trades for customers with accounts worth $25,000 or more, while E*TRADE offers no fees on trades involving cash or margin accounts.
Q: Which broker is better for short sellers with smaller account sizes?
A: E*TRADE might be more suitable for short sellers with smaller account sizes due to its user-friendly interface and competitive commission structure. Ameritrade's lower margin interest rates may benefit larger accounts more significantly.