Online Brokers: Comparing Merrill Edge and TradeStation

When you're ready to make investments, you'll need to open a brokerage account to complete your trades. Thanks to a growing number of online brokers, there is a broker to fit just about every investing style.

For today, though, we'll limit the playing field to just two brokers, Merrill Lynch and TradeStation, to see how they stack up for do-it-yourself investors.

Trading costs and commissions

Price differences between online brokers tend to be very small, amounting to a few dollars in either direction. This is the case here, as both discount brokers offer inexpensive trades on some of the most popular types of investments.

Data source: company websites.

Luckily, investors often pay effective prices that are lower than standard commission prices. TradeStation offers volume discounts, whereas Merrill Edge offers commission-free trades to investors who maintain certain minimum balances. Special offers for traditional brokerage accounts and IRA accounts can further reduce your actual trading costs.

Commission-free ETFs and NTF Funds

Fund investors should be aware that many brokers offer free transactions in certain mutual funds and ETFs. Brokers do not charge a transaction fee on commission-free ETFs and no-transaction-fee (NTF) mutual funds, which can be a tremendous benefit for some investors.

Data source: company websites.

Merrill Edge has the advantage when it comes to fee-free funds, but keep in mind that funds that aren't on its NTF list will incur a higher trading cost ($19.95) than at TradeStation ($14.95). For this reason, if you have a preference for a particular fund, you should see if it is available fee-free before opening an account. 

Account minimums

New and experienced investors alike will want to take into consideration how much money you need to open an acount. Merrill Edge does not require a minimum balance to open an account. TradeStation requires clients deposit at least $5,000 for a standard brokerage account, or $5,500 to open an IRA.

Be mindful of minimum activity requirements, however. TradeStation customers may incur a monthly fee of $99.95 if they do not meet activity requirements, or do not maintain a $100,000 balance. For this purpose, minimum activity is defined as trading 10 round-turn futures contracts, 50 options contracts, or 5,000 shares in a month. If you don't meet one of those minimums each month, you'll need a $100,000 balance to avoid the minimum activity fee.

Trading platform

Here at The Motley Fool, we believe in the merits of making long-term investments in companies we admire. That means that we rarely buy or sell and prefer to let the power of time and compounding work to our advantage.

Put another way, we don't trade much, so we don't put much weight on a broker's trading platform. As far as we see it, any platform that allows us to make the infrequent trade is good enough for us.

Long-term investors will find that buying or selling investments through Merrill Edge or TradeStation is simple, but we recognize that different investing styles require more or less from a trading platform. We'll let you make the call here, as it often comes down to personal preference more than anything.

International stocks and ADRs

If a foreign company strikes your fancy, you'll be happy to know that Merrill Edge and TradeStation allow for online trading of American depositary receipts (ADRs). Importantly, though, neither brokerage currently allows for trading in foreign stocks on foreign markets. This may somewhat restrict you to large foreign companies, since larger international companies are more likely to have an ADR.

Access to research gives you the opportunity to explore others' opinions, even if you disagree. Image source: Getty Images.

Research quality and tools

It can be helpful to get a range of insights and opinions from multiple sources, and many brokers give their clients access to outstanding research tools.

Merrill Edge delivers with access to reports and insight from Morningstar, S&P Capital IQ, and its BofA Merrill Lynch stock analysts. TradeStation produces a Morning Market Briefing, weekly stocks and ETFs reports, and provides access to some wire services, just to name a few of its news and research offerings. Honestly, one would find it hard to run out of things to read and research on most brokers' platforms.

Mobile app

If you have a phone or tablet, you can trade from anywhere you have internet access or cell reception. Both Merrill Edge and TradeStation score highly in reviews of their mobile capabilities. Here's how each brokers' users and clients rated their iOS and Android apps, as of Dec. 12, 2016.

Data source: relevant app stores.

Who's the best online broker: Merrill Edge or TradeStation?

These brokerages tend to cater to a different kind of investor. Active traders might prefer TradeStation's volume discounts on commissions. Infrequent traders may prefer Merrill Edge, due to the fact it doesn't have a minimum activity requirement, and because its standard commissions are a little lower than TradeStation's.

Ultimately, though, it's all about how a brokerage can help you place trades for your portfolio. And while The Motley Fool doesn't endorse any particular broker, we do want investors to have the knowledge to make an informed decision for their needs. Continue on to Fool.com's Broker Center to compare brokers, or visit our IRA Center for information that it specific to retirement investors.