The growing popularity of mobile trading is partly fueled by the development of apps that can stream data and trade complex options, according to the 2011 Online-Broker Review released this month by Barron’s.
Apps that can run on Android and iPhone platforms are leading the trend, the report said, but many iPad applications are still in development.
The report also noted that overall online trading “is on the verge of a stable maturity” and serves a wide spectrum from retail investors hoping to save a few dollars in commission to foreign-exchange specialists.
“Its ranks include asset-management giants like Fidelity and tightly focused specialists with names like Trade Monster,” said the report.
The review also noted a trend on the part of brokerage firms to expand existing social networks and create investor communities allowing clients to communicate with each other. This may replace the traditional experience of calling a broker to ask advice.
Barron’s ranked Fidelity’s online service the best option for long-term investing, and TradeStation as preferable for frequent traders. TD Ameritrade’s site was ranked highest for options traders, and InteractiveBrokers was the best option for international traders. New entries to the industry inclue TradingBlock, eOption, SpeedTrader and Merrill Edge.
Fidelity ranked as the best overall online broker, while TradeKing ranked as best discount broker, and ThinkOrSwim, part of TD Ameritrade, as best for active traders,
in a recent review by ConsumerResearch.com, a website linked to the nonprofit Consumer Reports.
“Consumer demand for these services is clearly there; some of the nation’s largest financial institutions – Bank of America, Chase, Wells Fargo, ING Direct, American Express, E*TRADE, etc. – see their apps among the most popular in the iTunes and Android app stores,” reports the winter 2011 edition of Corporate Insights publishing by the New York City-based Corporate Insight.
Wealthy investors are avid users of online and mobile technologies to manage their finances. Nearly two-thirds of smartphone owners and 69 percent of iPad owners use financial apps, according to Sprectrem Research. “This trend is expected to grow dramatically,” said Catherine McBreen, managing director of the Chicago-based consulting firm.
Access to online trading has grown dramatically in the last several years, notes the Financial Industry Regulatory Agency, and more than 100 brokerage firms now offer online trading services.
“With a few keystrokes and a click of the mouse, investors today can buy or sell stocks through online trading accounts with the same ease as they search the internet or play computer games,” FINRA said. “Investors need to bear in mind that while the mechanics of online trading are relatively easy – investing is not.”
A key risk in online trading comes from backlogs that delay the execution of trade orders. Market volatility and high trading volumes can result in trades that close at significantly different prices from those quoted at the time the orders are entered. To protect themselves online, investors should understand the difference between market orders and limit orders, FINRA said. Firms are required to execute a market order fully and promptly without regard to price, but the price can vary. Limit orders will be executed only at a specified price or better.
“Customers using limit orders receive price protection, but there is the possibility that the order will not be executed,” FINRA said.