How Online Stock Trading Investment Sites Work

Online stock trading can provide the convenience of investing in the stock market right from your home or office computer. With many of these sites, you'll be paying a lower cost to make trades and still benefit from the potential for building a great stock portfolio. Despite their low cost trades, it's important to understand some of the requirements and restrictions that might come a long with that account.

For example, a stock trading site like BuyandHold.com offers trades for a low $2.99 per buy or sell. However, these aren't real time trades where you can say "buy now" at a specific price. Instead, your trades are done during one of three daily trading windows. So it may be tougher to calculate how much stock your investment will buy. Since stocks can fluctuate in price during the market trading day, you may end up with more or less stock than you intended.

A trading website like ING Sharebuilder is a little less flexible than BuyandHold. At Sharebuilder's online stock investment site, your trades cost $4 each, and can be set up on a weekly, bi-weekly or monthly recurring basis. The caveat with Sharebuilder is that with this basic stock account, they only make stock purchases on Tuesdays, barring a market holiday. In this event, you can see how you have even less control over how your money is invested in a particular stock. Sharebuilder also offers two more plans for higher monthly payments, that give a certain amount of "free" trades per month.

Scottrade is another low cost online investing website. At Scottrade, each trade you make online only costs $7 and you have even more flexibility than the other two websites mentioned. Scottrade also offers the ability to make your trades via touch tone phone, or through an actual stock broker, both at higher costs. In addition, a stock trading website like Scottrade requires that you have $500 to open an account. The other two mentioned stock websites only require about $20 per trade to get started. All three websites will also include various fees in order to close out accounts, receive stock certificates and other related transactions.

As you can see, online stock trading can be a low-cost, convenient way to start investing your money in the stock market. The companies listed above are among the cheapest online stock trading websites. Always read the fine print before you get started, and make sure the website you choose for trades has a reliable customer service, good ratings from other customers, and doesn't have too many hidden fees or fine print disclaimers.