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Freetrade: Commission-Free Trading
Posted By Jim On 03/03/2005 @ 9:56 am In Investing | No Comments
Is this legitimate or even possible? Freetrade claims to give you your first 20 trades (market, limit, stop, stop-limit, short sell, odd-lot and OTCBB) for free. Your next 80 trades are only $3, the 100 after that are only $2, and anything else is $1. Your first thought would be SCAM until you see “by Ameritrade  (not TDAmeritrade)” right next to its name. The next cheapest brokerage house is BrownCo  at $5 a pop. Still skeptical? So was I so I signed up.
How can they afford to do this? Well, you know how ING Direct  is all virtual and so they can give you such good rates? Freetrade follows that philosophy and all your interaction with Freetrade will be entirely electronic. You won’t be able to call them up and ask a question, all correspondence will be via email. You won’t receive a paper statement and you can only place trades via the Internet or through the automated telephone system. You will not be able to talk to a human being. Again, if you’re not comfortable with that then I would strongly suggest you don’t use them.
I wanted to see how it worked so I signed up for a “Cash, Margin & Option” account. You’ll be required to fill out all sorts of personal information including your current profession, salary, and employer so have that information handy. The entire process took me only a few minutes and before I knew it I had directions on how to wire them money. Since it’s automated, I could either pay them $25 to initiate a wire transfer or simply do it myself (and pay my own bank fees) with their provided directions. After your initial wire, all other transfers can be ACH. There is a minimum account balance requirement of $5,000 for it to become and remain Freetrade” account, otherwise it considered an “Ameritrade” account with $10.99 trades!
The account itself is like most other brokerage accounts except you don’t have real time quotes (you can buy Ameritrade’s Screener for $9.99/month) and you don’t get access to any research. For me, that’s not important because my Roth IRA is held at TD Waterhouse (now TD Ameritrade) so I can use the research and RT quotes there (At nearly $18 a trade, I better). A few other niceties that you won’t are automatic dividend reinvestment and fractional share purchases, but that may not be significant for you.
Any hidden fees? There are a few that they don’t advertise (obviously, but hardly hidden) and that you should check out. Click on Account Services and then on the link for Fee Schedule and you should see them. Your first two incoming or outgoing wire transfers are free, otherwise they’re $25, and brokerage transfers are $25 inbound and $50 outbound.
I have yet to wire money into the account (I opened it yesterday) or enter any orders in but I will update this article as soon as I do and let you all know how it goes. Anyone any experience with Freetrade? For me, the Ameritrade name gives it legitimacy and I’m not too worried about it.
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