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TradeMONSTER Review

Posted By Jim On 09/22/2009 @ 6:52 am In Investing | 13 Comments

TradeMONSTER [3] [3] is a relatively new online discount broker [4] in an industry that hasn’t seen a new entrant in a few years. I believe TradeMonster’s strategy is to offer relatively low pricing (not rock bottom) and a powerful suite of browser-based analysis tools. TradeMonster is owned by optionMonster, a financial media company that publishes market news and commentary on options and stock trading. If you’ve ever watched CNBC then you’ll recognize a bunch of the faces behind optionMonster (Jon ‘DRJ’ Najarian and Guy Adami are on Fast Money).

The aspect of TradeMonster that really jumped out at me is the first thing I’m going to review – paper trading.

Practice Paper Trading

This is the first broker, that I know of, that lets you open a paper trading account (called Paper Trade) with all the features of a regular trading account. To do a TradeMonster review and not talk about this feature would be a travesty! That means you can open an account for free, pay no fees, practice trading stocks or options, and still use all of the tools available to regular brokerage account holders. You get real time streaming quotes, charts, and balances; all the stock analysis; performance charts, projections, risk analysis; as well all their options spreadMAKER tools (for complext options). It’s generous of them to offer all these tools for someone who isn’t paying a penny.

If you want to practice, I can’t think of a better place than here. It’s like behind able to test drive a Ferrari without having to pay the price when you slam it into a wall.

Commission Pricing

  • Stocks: TradeMonster charges a flat $7.50 equity commission on up to 5,000 shares, which is higher than what my current broker of choice, TradeKing, charges. TradeKing charges $4.95 a trade, unless you trade stocks priced less than $1, then they add a $0.01 per share premium on top of the $4.95. If you’re using anyone else, chances are their prices are going to be higher than TradeMonster for stock trades.
  • Options: TradeMonster charges $12.50 for up to 20 contracts, $25 for 50 contracts, $50 for 100 contracts, and $250 for 500 contracts. TradeKing can only beat that pricing if you purchase 10 contracts, which is $11.45, otherwise the commission structure is higher at every other tier ($17.95, $37.45, $69.96, $329.95 respectively). The disparity is even higher when you talk about multi-leg spreads.
  • Mutual Funds: Here’s where I think TradeMonster has a competitive edge over competitors because they charge $15 per mutual fund purchase and it’s free to sell. TradeKing charges $14.95 on both the purchase and sale on no-load mutual funds (which is standard commission pricing). So if you want to invest in both stocks and mutual funds, TradeMonster has a favorable commission structure for that.
  • Bonds: The commission on Municipal, Corporate, Agency, and Treasury Bonds is $15.00 per trade, which is actually equal to or cheaper than TradeKing. TradeKing charges $4.95 per bond with a $14.95 minimum fee. If you were to buy Treasuries with TradeKing, the fee jumps to $24.95 per transaction.

Tools

At E*Trade you get access to a suite of Power E*Trade tools if you’re an active trader that makes 30 trades a quarter. At TradeKing, you need 25+ trades a month to get access to their streaming quotes tools. At TradeMonster, everyone gets access to the tools and they’re browser-based, so you don’t have to download anything.

Since their pedigree was in options trading, a lot of their tools have options traders in mind. They have several powerful tools, most notably SpreadMAKER and AdjustTRADE, designed specifically to help you tailor your options trading. They also have portfolio simulators that let you see how your trade would react to market changes without your money on the line.

Summary

If you want powerful tools and the flexibility to get good pricing on any trade, TradeMonster is a pretty good choice. I’ll be sticking with TradeKing for now because I only use my broker to trade stocks and I don’t use sophisticated charting tools, so TradeKing’s $4.95 trades and lack of sophisticated tools for a low volume trader like myself is not an issue. You’ll be hard pressed to find these types of tools at any other discount broker, which is probably the strategy TradeMonster is going for.

I hope you enjoyed this TradeMonster review and learned a lot about the service. Do you have an account at TradeMONSTER? I’d love to hear your opinion about it.


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