One of the most frequent questions that come across our desks here at the Penny Sleuth is “Which broker should I use?”

Finding the right broker is like finding the right car or the right house – it’s a personal decision where what’s right for one person may not be right for the next. That is why it is very hard for us to answer that question for you here.

What we can do is provide you with a helpful starting point in researching the best broker to suit your needs.

While searching for a broker, it’s important to be honest with yourself about how much help you will need so that you can make sure to pick a broker that can fill in the knowledge gaps. If you aren’t chained to the computer, you want to make sure you have other ways to execute your trades. And you’ll also want to know what kind of trades you are able to make— does the broker allow trading in OTC stocks? Forex? Options?

Once you know what you want from your broker, you are ready to start your search.

I have pulled together a bevy of information on many of the most popular brokers available today. Remember, though, that these metrics can change – that’s why it’s essential to contact any of these firms directly before you commit your capital.

2012 Broker Guide

(Please note this list is in alphabetical order.)

Charles Schwab: Charles Schwab was the first discount broker on the market, and it revolutionized the way trading was done. While Charles Schwab may have been the pioneer in the discount broker world, it’s no longer the cheapest.

ChoiceTrade:ChoiceTrade is probably the most straightforward of all the online brokers. It has a pretty darn simple commission structure. If you aren’t an active trader/investor, ChoiceTrade may be a nice fit for you. There are no inactivity or quarterly fees if you don’t make a bazillion trades a month.

E*TRADE: E*TRADE is a cheap online broker mainly for active traders who don’t need a lot of hand-holding. While there are no extra commissions to trade OTC stocks, these trades must be placed with a limit order.

Fidelity:Fidelity offers a lot of research capabilities and is marketed for the more serious investor (with a higher net worth) who likes the bells and whistles of a full-service broker but the price and convenience of a discount broker.

Firstrade: Firstrade may not be quite as well-known as some of the other online brokers, but it’s definitely worth a look. It is truly a deep-discount brokerage service that should only be used if you need no help whatsoever.

Interactive Brokers: IB’s commission structure is a bit more complex than most, but it’s worth thumbing through. A lot of Penny Sleuth readers say that this is their favorite broker. Interactive Brokers is aimed primarily at highly experienced and professional investors. If you do not have investing experience under your belt, stay away from IB.

LowTrades: LowTrades is another good little discount broker to take a look at. As the name suggests, LowTrades is not expensive — managing to low-ball even Scottrade. That’s because LowTrades was founded on the belief that there is an abundance of free research available to the average investor via the Internet. All it provides is a quick, easy transaction — but that’s what keeps the commission rate so low.

MB Trading:MB Trading is another low-cost broker to keep an eye on. They offer round the clock customer support.

optionsXpress: A significant difference between optionsXpress and most of the other online brokers: optionsXpress charges nothing for trades made with a broker’s assistance.

PennTrade:PennTrade is the online arm of Pennaluna & Co., an Idaho-based broker. It has one of the simplest fee structures of any online broker. But simple doesn’t necessarily mean cheap.

Scottrade: Scottrade is one of the cheapest online brokers you will find. Like E*TRADE, Scottrade is a very bare-bones broker. But it is cheap!

ShareBuilder:While ShareBuilder is a good brokerage choice for new investors with limited capital and experience, its available stocks are limited to those on the ShareBuilder Stocks List, which doesn’t include many penny stocks — especially those traded OTC.

SogoTrade: SogoTrade is another unique broker that’s attempting to take on the traditional price structures of the larger discount brokerage firms. Check out SogoTrade’s special offers if you’re considering joining — they often give out 100 free trades for new accounts.

TD Ameritrade: TD Ameritrade is the company formed from the merger of TD Waterhouse and Ameritrade. There is no minimum account balance, but in order to be eligible for most promotions, you must have at least $1,000 in your account.

thinkorswim: thinkorswim may have higher account opening requirements than other brokers, but this award-winning company also offers more flexibility with access to futures and currency trading in addition to standard stocks and options. The company also provides its clients with advanced trading tools — like its terrific trading platform — at no charge, which is definitely a big benefit for more-experienced investors.

TradeKing: Unlike other brokers, TradeKing’s $4.95 commissions include broker-assisted trades, which often cost near $50. If you’re new to the investing game, and want a broker to help guide you through your trading decisions, TradeKing is a smart choice.

tradeMONTSTER: While options trading is tradeMONSTER’s bread and butter, this modern broker also offers attractive pricing for stock investors.

Trading Direct: Trading Direct is a division of York Securities, which was founded in 1979 and is one of the original discount brokers.

Zecco:While Zecco is a relative newcomer to the brokerage game, their low prices have been quickly attracting investors.

You don’t want to simply choose the broker with the lowest price… you may find that it is worth paying a little more. After all, how well your broker executes your trades can be the difference between profits and missed opportunities within your portfolio.

While our broker list does not cover every online broker out there, we hope it provides you with a good starting point.

As always, we would love your feedback! If you have had good or bad experiences with any of the brokers listed in the 2012 Broker Guide, share them in the comments section of the Penny Sleuth website.

Sincerely,

Jessica Comitto

Jessica Comitto

Jessica Comitto is the associate editor for Agora Financial's penny stock publications, and the newest contributor to the Penny Sleuth. Jessica is a veteran student of the markets, and has experience bridging the gap between retail investors and complex investment strategies. She holds a degree in history from the University of Maryland.

View articles by Jessica Comitto