Guide to Commission Free Trading

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For the longest time ever, venturing into stock trading was the most dreadful financial step you could take. Getting brokers with reasonable fees (let alone free trading) was almost impossible. Fortunately, all this has changed, and you can find several commission-free trading avenues as you begin your stock trading journey. 

Stock trade newbies often lack enough profits to cover both their needs and the exorbitant commission fee that some brokerages charge. If you are a newbie, this article will explain how commission-free stock trading works, its pros and cons, and the best avenues for you.

What Is Commission Free Trading? 

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So what exactly is commission-free stock trading, and how does it work? Put simply, it is a system in which stockbrokers help you with your trading activities without deducting their commission. 

As an investor, this serves as a welcome relief since the more investments you make, the more commission you will have to pay. Take, for instance; your commission fee is 6.5%; every time you spend $1000, you will lose $65 in commission. Not to mention the annual fee you have to pay for your stocks or mutual funds. The cumulative loss can amount to a huge figure of money.

However, you should know that commission-free trading is not entirely free. Your stocks may attract several other fees, such as expense ratios which are part of the costs you have to pay when trading mutual funds and exchange-traded funds. The most crucial step in any stock trade is fully understanding the fees you have to pay at each trading point.

How Does Commission Free Trading Work? 

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Since Robinhood began its zero-commission trading in 2013, almost all other stock brokers followed the trend in a bid to keep their clients. Today, brokers such as E*TRADE, Ameritrade, and Schwab do not charge the traditional commission for their trades.

While commission-free trading may seem like a costly venture on the broker’s part, the truth is that brokers do not solely depend on commission to get their income. From margin loans to bank deposit account fees, there are plenty of other revenue avenues that stockbrokers bank on today.

Types of Commission Free Trading 

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Depending on your investment needs, there are a number of options you can choose from. Here are some of the common commission-free options that trading brokers offer today;

  • ETFs (exchange-traded funds)
  • ETNs (exchange-traded notes)
  • Mutual funds

Apart from the traditional stock trading brokers, there are several commission-free crypto trading options you can explore. Cryptocurrency brokers today are also embracing commission-free options for their clients.

Pros and Cons of Commission Free Trading 

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The greatest upside for commission-free trading is that it saves you lots of dollars annually. You can invest in plenty of stock trades at a go without having to pay commission. What’s more, zero-commission trading allows you to experiment with multiple trading options before you settle on the stocks you want.

On the flip side, some commission-free traders may sell your order flow, which in turn affects your overall profits. In this case, they sell the order flow to buyers who buy your stock, only to sell it back to you at a slightly inflated cost. However, you should know that the amount you lose will not be as high as the commission you would otherwise pay to brokers.

There are plenty of other pros and cons of commission-free trading; however, any expert trader can attest that the pros of commission-free trading outweigh its cons.

Where to Conduct Commission Free Trading 

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So now that you know the basics of how zero-commission trade works, you are probably wondering where to conduct your trading for free. Here is a list of the best commission-free trading apps whose free commission trades will kick off your investments.


E*TRADE is arguably the best brokerage for newbies as they offer excellent investments (both for EFTs and mutual funds) at no commissions or transaction fees. What’s more, E*TRADE boasts some of the lowest expense ratios in the investment world. It has plenty of other benefits, with its major downside being its far-from navigable website. Despite its website, it is excellent for all your investments. 

2. Vanguard

If you are thinking of more long-term investment options, you will want to consider Vanguard. Vanguard is well-tailored for long-term investors and offers low costs for these investments. They also have a website that you can easily navigate and offer some of the best trading tips and resources you can get. 

3. TD Ameritrade

Whether you want to get into hands-on trades or invest in mutual funds, TD Ameritrade has excellent trading platforms for you. They have lower expense ratios than most other brokerages, and their website and mobile apps are easy to use and very secure. Not to mention their professional and reliable customer service that is available 24/7.

4. Charles Schwab

Schwab gains its popularity from its fractional shares of stock. This allows you to buy only the fraction of shares that you need rather than the full share of stock at the full price. This form of trading is particularly useful for new investors since they get a chance to invest what they can afford as they build up to an entire share. Schwab also offers low-cost options for all its investments.

5. Fidelity

Another zero-commission platform you will want to consider is Fidelity. Here, you will find any investment options to suit your needs. Whether you are a beginner or a guru in the stock market, Fidelity has impressive deals for you. Their amazing low expense ratios and excellent (ever-present) customer care personnel will also make your trading experience worthwhile. 

However, before you make any investments, consider weighing all your options and finding brokers whose terms are favorable. Remember that some stocks have hidden fees that are not as apparent as you may wish. So before settling on any stocks, be sure that you have a clear picture of what you are signing up for. And once it is clear, trade away!