Cheapest Brokers 2024 | Brokers With Low Fees

Trading brokers make money in various ways, from spreads and commission to rollover charges and inactivity fees. Unsurprisingly, the cheapest brokers for trading stocks, forex and CFDs are appealing, especially for beginner traders. But should traders sign up for accounts with the lowest fees? In this article, we list the cheapest brokers in 2024. We also explain how trading platforms make money and how to find a brokerage that offers the ‘full package’.

How Brokers Make Money

Online brokers charge fees to cover the costs of executing transactions and services to maintain a live trading account. Of course, they also want to turn a profit, so they apply a mark-up for their services through various channels.

Among the most important trading fees is the spread, which is the difference between the bid and ask price of an asset, such as a stock. Some firms apply an uplift to the spread to cover their costs and to generate a profit. Another popular trading fee is the commission, which is a flat charge per trade. Comparing spreads and commissions is often the easiest way to gauge how cheap or expensive an online broker is. With that said, it gets slightly tricky when some firms offer commission-free trading, while others provide ECN accounts that offer raw spreads in return for a higher commission charge.

Trading brokers can also make money through several other channels:

• Payment fees – Some platforms charge a flat fee per transaction or a percentage of the payment value. Fortunately, the cheapest brokers absorb any third-party processing charges so they can offer fee-free payments to traders.
• Overnight charges – Swing traders may need to pay a charge to hold positions open overnight, especially when trading on margin. In forex trading, this is also known as a swap rate and it’s the interest rate differential between the two currencies.
• Inactivity penalties – Some online brokers charge a monthly inactivity fee if accounts are left dormant for a prolonged period. This is typically three months but can sometimes be six months or one year.
• Add-ons – Trading platforms may also charge a one-off fee or a subscription charge to use premium features, for example, virtual private servers (VPSs), advanced charting tools, copy trading services, or automated investing solutions.

Now when you take all of these fees into account, identifying the cheapest brokers isn’t always straightforward. But it is only when you consider all the charges together that you can paint an accurate picture of the trading brokers with the lowest fees.

Types of Fees

Whilst the summary above is a helpful starting point, it’s worth looking at some of the key trading fees in more detail…

Income Generating

Income generating fees are made from direct client trading. Brokers may charge a commission on each position opened, as well as take a percentage of profits made when the trade is closed. For example, a platform could charge a flat-rate commission of $5 for each trade while also taking 0.5% of any profit.

Spreads are a little different. This is the difference between the ask and bid price of an asset, or in other words, the prices that you can buy and sell an asset for right now. Brokers generate income by widening the spread a tiny amount on each trade. This can feel insignificant on each position, but it can add up when some online brokers have millions of customers executing positions every day.

Importantly, brokers may generate income based solely on commission, adjusted spreads or a combination of the two. Some brokers will state they have the cheapest spreads around while charging a large commission. In contrast, other platforms may lure you in with the promise of no commission trading but then increase the spread. With this in mind, it is important to compare both charges together.

Note, TD Ameritrade and Interactive Brokers are both good options if you’re looking for the cheapest high-quality brokers. TD offers zero-commission stock trading though wire withdrawal fees are high. Interactive offers commissions from $0.005 per unit and a free withdrawal each month.

Account Management

Another bucket of fees relates to the services your broker provides to support and maintain your account. This could be a minimum withdrawal fee for processing transactions or a conversion fee if you are transferring Euros into an account denominated in US Dollars. If your live account receives real-time trading signals and alerts, you may also have to pay a small fee for acting on trade suggestions.

Some brokers, particularly those in India and countries in South Asia, also charge maintenance fees. These are typically paid once a year and relate to the day-to-day running of the account. Even the cheapest discount broker in India will likely charge some form of annual maintenance fee, though they may forego it in the first year.

Other Charges

Even the cheapest brokers also make money in a few other ways. If you trade with leverage, for example, you may have to pay interest on the borrowed amount, which can depend on the length of time you trade with the broker’s capital. With this in mind, leveraged traders should shop around for brokers with the cheapest margin rates. Note, Muslim traders can often open an Islamic account to avoid paying any overnight fees, which are generally considered haram.

As outlined above, some firms also charge an inactivity fee following a period of no trading. Once your account qualifies, you could be charged upward of $10 per month until you place a trade. To avoid paying a penalty, either close your account and withdraw your profits or place a nominal trade to keep the account active.

Tiers & Levels

Traders looking for the brokers with the lowest fees should consider the level of account they open. Most brokers offer several account options, from a beginner micro-lot account to a high-volume professional solution. Importantly, brands normally offer more competitive fee structures as you move up the account tiers. This can mean tighter spreads, reduced commissions plus fee-free deposits and withdrawals. A dedicated account manager along with advanced trading tools are also usually provided.

The catch is that you often have to make a larger initial payment, sometimes upwards of $10,000. You may also have to trade a certain number of lots each month. Yet for those that can afford the steep early payment, day-to-day trading fees can come in significantly lower.

Benefits of Brokers With Low Fees

The main advantages of trading at the cheapest brokers include:

• Clear fee structures mean no nasty surprises
• Free educational material and trading tools for beginners
• Successful traders improve their profit margins and ultimate returns

Drawbacks of Brokers With Low Fees

There are also some downsides to trading with the cheapest online brokers:

• Services such as customer support and premium analysis tools may be lacking
• Discount brokers charging abnormally low fees may be a scam
• Low trading fees can require a larger initial deposit

How to Compare the Cheapest Brokers

While finding discount brokers with low fees is important, it isn’t worth sacrificing on other elements that will ensure you have the best trading experience. With that in mind, also take into account the following:

• What markets do they offer? Some of the cheapest brokers may only offer specific products like binary options or stocks. In contrast, other leading brands offer a breadth of markets and instruments, from forex and equities to commodities, cryptos, bonds, futures, REITs, ETFs and more.
• What trading platform do they use? Some of the cheapest brokers may provide a basic web-based platform while other companies offer the top-rated MetaTrader 4 and MetaTrader 5 terminals. If you do opt for a beginner-friendly browser solution, check it offers instant and pending orders, a range of charting options, plus customizable layouts and indicators.
• Are they regulated? The best brokers are regulated by trusted watchdogs like the UK Financial Conduct Authority (FCA), the Australian Securities & Investments Commission (ASIC), or the Cyprus Securities & Exchange Commission (CySEC). Some of the cheapest brokers with the lowest fees may not be subject to robust regulatory oversight which limits your recourse channels should you encounter withdrawal problems, for example.
• Can you trade with leverage? Trading on margin allows you to increase your purchasing power by borrowing funds from online brokers. This means you can open larger positions or split your capital across various markets and strategies. Note, that European regulated brokers offer leverage up to 1:30 while offshore firms offer rates up to 1:1000 (though this can increase your risk exposure).
• Do they offer a demo account? A free paper trading account is a good way to test a broker’s products and tools with no risk. For beginners, in particular, this can be a great way to get familiar with trading before putting cash on the line.
• What is the minimum deposit? Even some of the cheapest brokers may require a large minimum deposit when you open an account. XTB, however, has no minimum deposit requirement and offers competitive trading fees.
• When is customer support available? A reliable customer support team can prove invaluable for beginners who are new to products and platforms. Fortunately, brands like Pepperstone offer 24/7 support along with a transparent pricing schedule.

Bottom Line on Cheapest Online Brokers

The cheapest brokers are appealing for good reason. They help protect profit margins and offer low-cost access to popular financial markets like stocks and forex. However, brokers with the lowest fees do not always provide the best all-round package. The cheapest platforms may sacrifice trading tools and support. They might also offer a narrower range of assets, limited regulatory oversight and have hidden fees. Use our guide above to find the right broker.

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