TradeStation Review

Jordan Wathen is a personal finance expert with a deep professional and personal expertise on credit cards. His articles have appeared on sites such as MSN, CNBC, and Yahoo.

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TradeStation is an online discount broker that courts active traders and cost-sensitive investors with low commissions and a fully-featured trading platform. A recently-reduced minimum (just $500 to open an account) makes TradeStation accessible to new and wealthy investors alike.

Our Bottom Line

A discount broker that's designed for active traders and cost-sensitive investors. If you're willing to do the work to price each of the two commission schedules, you can often spend less than with other platforms.

Fees:

$5.00 flat or $0.01 per share

Account Minimum:

$500

Special Offer

New accounts funded with qualifying assets can earn between $100 and $2,500 in cash rewards.

Top perks

Designed for active traders and sophisticated investors, TradeStation may not be a best fit for everyone. However, it does have some killer features that make it stand out from the pack:

  • Low commissions -- Whether you choose its flat or variable commission schedule, TradeStation is competitively priced against its peers. Investors who have a $100,000 account balance or more can benefit from getting its variable pricing plan without paying a $99.95 account service fee.
  • Powerful platform -- Designed for active traders, TradeStation 10 is a powerful trading platform with all of the functionality you’d expect. Traders seem to love its complex charting capabilities and functionality for automated trading strategies.
  • Low minimum -- Investors can open a brokerage account with TradeStation with an initial deposit of just $500. For IRAs, TradeStation has a $5,000 minimum.

Commission prices

One of the perks with TradeStation is that it features two different commission schedules. Investors can pay a flat rate for stock, ETF, and options trades, or pay a variable rate based on the size of the order. Most discount brokers only offer a flat-rate commission schedule.

The table below shows how the two commission schedules compare.

Commission schedule Stocks and ETFs Options Mutual funds
Fixed $5.00 per trade $5 plus $0.50 per contract $14.95 per transaction
Variable $0.01 per share ($1 minimum), $0.006 per share above 500 shares $1.00 per contract $14.95 per transaction

TradeStation’s variable commission schedule enables investors to pay a much lower commission when trading small blocks of stock or options. For example, if you wanted to buy 300 shares of stock, you would pay just $3 in commissions under its variable commission schedule. If you wanted to buy 800 shares, you’d pay $6.80 ($0.01 on the first 500 shares, and $0.006 on the remaining 300 shares) to make the trade.

Likewise, options traders can save money with the variable commission model, too. On any trade sized at less than 10 contracts, TradeStation’s variable commission ($1.00 per contract) is less expensive than its fixed commission prices ($5 plus $0.50 per contract).

That said, the variable commission plan isn’t always best. That’s because accounts with variable pricing can be subject to additional monthly account and market data fees. (We’ll have more to say about account fees in the section on fees below.)

Buying mutual funds and ETFs

Investors who use mutual funds and ETFs as an integral part of their portfolio may find TradeStation’s fund features disappointing. The brokerage does not offer any commission-free ETFs, and it charges a fee to buy or sell any of the 5,000 mutual funds it offers.

Total mutual funds More than 5,000
No-transaction-fee mutual funds None
Commission-free ETFs None

For this reason, TradeStation is perhaps a better fit for active traders rather than long-term retirement investors (who are more likely to use mutual funds and ETFs) to manage their portfolio. Many other brokers offer thousands of mutual funds and ETFs that their customers can trade for free. This may be a make-or-break feature if you use mutual funds and ETFs in your portfolio.

Fees you should know about

Before you open a brokerage account, you should read through a broker’s fee disclosures. We took a deep dive into TradeStation’s fine print, finding a few fees that warrant additional discussion.

  • Inactivity fee -- TradeStation customers must make at least 5 trades per year, or have an average end-of-month equity balance of $2,000, to avoid its $50 annual inactivity fee. This inactivity fee is easy to get around, but it makes TradeStation a less compelling choice for people who want to start small.
  • Account service fee -- This fee only applies to traders who select its variable commission pricing plan ($0.01 per share, and $1.00 per options contract). To avoid this TradeStation’s monthly fee of $99.95, you must have an end-of-month equity balance of at least $100,000. Alternatively, you must trade 5,000 shares or more, trade at least 50 options contracts, or make 10 round-turn futures or futures options contract trades in each month. Again, this fee does not apply to people who pick its flat-rate ($5 per stock and ETF trade) pricing schedule.
  • Market data fees -- Investors who use its flat-fee commission schedule receive free AMEX, NASDAQ Level 1, NYSE and OPRA data free of charge. However, the same data costs $6 per month in combined a la carte market data fees for those who select its variable pricing plan. Other data, like NASDAQ Level II quotes, are available at a cost of $10 per month. Other brokers make Level II data available for free.
  • Options exercise and assignment fees -- Options traders will want to take notice of the fees for exercising an option, or having options assigned. TradeStation charges an exercise/assignment fee of $14.95, higher than its base commission price of $5. In addition, it also charges an early exercise or assignment fee of $1.50 per contract, with a $5.95 minimum. Most brokers set exercise and assignment fees equal to their base commission.

Trading platform

Like many brokers, TradeStation offers multiple solutions for different types of investors and devices. It offers a simple browser-based platform known as Web Trading, a sophisticated desktop platform known as TradeStation 10, as well as mobile apps for smartphone users.

  • TradeStation Web Trading -- This simple browser-based platform enables investors to quickly log in to check streaming real-time prices for stocks, ETFs, options, and more. Placing a trade is a snap, thanks to its “one-click” feature that allows traders to place a trade in a matter of seconds.
  • TradeStation 10 -- A key feature of its desktop platform is complex charting. It offers 50 years of historical charting data, plus hundreds of technical indicators (moving averages, etc.) that can be overlaid on any chart. Customers can build a watch list, which can show hundreds of data points for individual securities, offering a quick view of key metrics for your favorite stocks. TradeStation’s RadarScreen is a cool feature for scanning the market in real-time based on customizable indicators. OptionStation Pro, which is built into the TradeStation 10 platform, provides a clean view of options chains, and enables you to see the max profit or loss for simple or complex options trades.
  • Mobile app -- iOS and Android users can use its mobile trading app to check their portfolio’s performance and place trades (even complex options or futures trades). Users who would prefer not to download an app can also visit use its browser-based platform, which scales down to fit smaller screens.

As long-term investors, we don’t obsess over trading platforms, since we don’t need many of the features that traders do. We think it’s difficult to judge a platform objectively -- what works for one investor may be unworkable for another -- so we’d encourage you to give a platform a test run if a platform is especially important to your trading needs. If you just need to check your portfolio’s value and place the occasional trade, virtually any broker and its platform will work for you.

Margin rates

Investors who use margin loans to leverage their portfolio know that the cost of using margin can quickly become the largest expense associated with having a brokerage account. TradeStation ranks well for having lower margin rates than many competing brokerages, though it is most competitive for people who carry large balances.

TradeStation’s margin rates for stocks and ETFs are based on a tiered scale.

Margin balance Interest rate
Less than $50,000 9.50%
$50,000 to $499,999 8.75%
$500,000 to $1,999,999 5.50%
$2,000,000 and up 3.50%

Of course, if you don’t plan on using margin to make investments, the rate it charges on margin makes no difference. Investors who use cash accounts (many long-term stock, ETF, and fund investors) can’t borrow to invest, so the rates it charges are irrelevant.

Customer service and support

Online brokers are able to charge lower commissions than full-service brokerages because they eliminate most of the overhead costs. That said, they haven’t eliminated support by phone or online chat when you need it, as many discount brokers operate customer support centers around the clock.

As an online brokerage in pure form, TradeStation doesn’t have a branch network like many of the largest online brokers do. However, it offers support by phone or online chat on weekdays from 8 a.m. to 8 p.m. Eastern Time. Technical support for its platform is available 24 hours a day, Sunday to Friday.

Research and screeners

In the research department, TradeStation ultimately caters more to short-term traders than long-term investors. While it boasts an excellent stock and ETF screener, it doesn’t offer access to any research reports, nor does it offer basic functions like a quick link to annual reports or SEC filigs for individual stocks -- features that long-term fundamental investors may favor.

Here are a few of the research and screening tools worth mentioning in greater detail:

  • Morning Market Briefing --Proprietary to TradeStation, the Morning Market Briefing is a 30 minute video presentation about the markets, economic data, and important events over the next trading day.
  • News -- TradeStation customers can get market news from Benzinga for free, though many other news sources are available on a monthly subscription basis through its TradingApp store.
  • Stock and options screeners -- Powerful stock and options screeners are built into the TradeStation platform, enabling you to quickly sort for trading ideas based on preset screens. The screening tools have hundreds of customizable parameters for technical and fundamental investors alike.

Investors who want access to free third-party research (Morningstar, S&P, CFRA, etc.) for stocks, mutual funds, and ETFs may want to look elsewhere. Many other discount brokers offer in-depth research from third-party research firms for free just for having an account.

This brokerage account is right for you if:

Not sure if TradeStation is right for you? Here’s an easy way to decide: If the following statements apply to you and your trading needs, then TradeStation should make the short list of brokers fit for your account.

  • You trade often. TradeStation works well for people who want to trade frequently, given it has competitive stock and option commission prices, as well as a robust platform that caters to the needs of active trades.
  • You’ll keep a large balance. Investors who maintain a balance of $100,000 or more can avoid TradeStation’s monthly account fee under its variable commission pricing plan. Of course, if you choose its flat-rate plan, you won’t be charged this fee, and you can avoid its inactivity fee by making just 5 trades per year, or keeping a balance of at least $2,000.
  • You don’t use funds. TradeStation doesn’t offer any commission-free ETFs and doesn’t have any no-transaction-fee mutual funds. Investors who rely on mutual funds and ETFs may find that commission-free ETFs and NTF mutual funds offered by other brokers make them a better fit for your portfolio.

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