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The myriad of online brokerage sites can make it difficult for a trader to choose which site to use for trading stocks online. There’re tons of factors to consider when choosing an online broker: What features do they offer? What do they allow you to trade? What is their minimum deposit, and of course, what are their fees?

It’s tough to decide with so many choices, so I’ve put together a brief review of my top seven choices for trading stocks online:

Scottrade

Scottrade is one of my favorite online brokers for trading stocks online. They have great prices all around at only $7 for market and limit orders and options are only $7 + $1.25 per contract.

Scottrade also offers free streaming quotes and has no inactivity or maintenance fees and they only require a $500 initial deposit to get started.

ShareBuilder

With market and limit orders costing $9.95 per trade and options costing $9.95 + $1 per contract, ShareBuilder is by no means a bargain for the frequent trader, but that’s not what ShareBuilder is all about.

ShareBuilder has no minimum and allows you to have a diversified portfolio with very little money. For example, let’s say you have 10 stocks you’d like to invest that would usually cost around $25,000 for you to be properly diversified but you can only spare $200 a month. ShareBuilder will automatically invest that $200 a month for you and spread in out to the stocks you choose. It will even buy fractions of a share to keep your asset allocation plan in line and they only charge $4 for automatic investment trades (you can lower the price if you’re planning on investing more frequently by using one of their monthly fee services).

ShareBuilder is right choice for anyone who is using a buy and hold strategy of trading stocks for the long term.

Etrade

I figured Etrade deserved a nod here. They have a range of incredible services (for a fee) and they have very competitive rates (if you’re an active trader with over $50,000 in your account). Their margins also get down to as low as 4.24% (if you’re trading with over a million dollars).

Etrade is a great choice for the professional (and obscenely successful) trader. However for the majority of people, Etrade’s rates aren’t competitive with other options for online stock trading. Still, for the affluent professional trader Etrade is far and away the best option on the net.

Zecco

While they only offer the most basic stock analysis options for free, Zecco does offer stock trades for only $4.50 per trade and if you have at least $2,500 in you account (there’s no minimum to open) you get your first 10 trades free! In addition, option trades are only $4.50 +$0.50 per contract. Zecco also offers some great free tools to screen and execute complex option strategies making this site a great choice if options are an important facet of your online stock trading strategy.

Marsco

Marsco offers an impressively low $3.95 per stock trade for an unlimited number of shares and $3.95 +$1.25 per contract for option trades with no inactivity fees. They offer streaming quotes and a couple other basic services and they require a relatively hefty $2,500 to open an account.

Trade King

Trade King offers many more free research tools than your average deep discount broker in addition to their admirably low trading fees: $4.95 stock trades (even for broker assisted trades!) and $4.95 + $0.65 per contract for option trades. The cheap broker assisted trades alone Trade King a great choice for trading stocks online.

Options Xpress

Options Xpress may not be the cheapest option on the web, but it is definitely the most comprehensive. With this site, you can trade stocks, options, futures, or even options on futures. It truly is a on stop shop for online trading.

Their pricing structure is depends heavily on how much you trade, so rather than list everything in this article, you can just click here to check out their commissions.

There’s a lot of options for trading stocks online. Above are just a few of my favorites. Check them out and good luck in your trading!

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Popularity: 36% [?]

If you haven’t read my first article on Prosper go back to get a little background first.

For those of you who are reading on from the first article, you can already see the potential Prosper has for earning passive income. Of course there’s still risk involved in loaning money to strangers, so here are some tips to help you make smart lending decisions.

Know Your Default Rates

If you’ve been reading my blog recently, you know that I believe in exploiting probabilities. That’s exactly what you’re doing when you loan money. For example, people with B credit will default 1.80% of the time. So if you make 100 loans at $50 each to A credit borrowers, you’ll lose $100 on average (rounded up to 2%). Here’s how we use that information:

APR Desired: 15%

Money Invested: 100 loans @ $50 ea. =$5000

Money Invested: $5000

Default Rate: 2%

Annual Income: $750 = $5000 x .15

Effective Money Invested: $4900

Then we figure out what interest rate we need in order to earn $750 annually with $4900 invested.

750/4900 = 15.31%

Here’s a table of historic default rates on prosper.

Know Your Borrower’s Debt to Income Ratio

Debt to income ratio is determined by dividing a borrower’s fixed monthly expense by their gross monthly income. Ideally your potential borrower should have a debt to income ratio of 20% or less. The higher a borrower’s debt to income ratio, the higher the lending risk. You’ll need to take that into consideration when determining what interest rate to accept.

Follow the Money

Where are all the seasoned members of Prosper putting their money? That could be a good indicator of where the good bets are. Look for loans that look like they have a good chance of being fully funded.

Diversify, Diversify, Diversify

No matter how careful you are, you will have loans default. It’s a statistical certainty. The good news is that if you followed my advice, your portfolio is prepared for it. In fact, your portfolio is expecting default.

If you’re not properly diversified you’re gambling. You need to spread your money around to as many loans as possible that meet your criteria. For example, $1000 should be divided into 20 loans at $50 each rather than one loan of $1000.

Prosper.Com offers the average person the opportunity to make money in lending. As in all investments there is some risk involved, but with proper risk management you can earn returns far above the market average.

Ready to start? Join Prosper.Com and get a $25 bonus!

Popularity: 37% [?]

Lending money can be a great way to earn passive income. Take credit cards for example. If you’re like most people, credit card companies are earning passive income off you right now. How much interest do you pay on those credit cards of yours? 8%? 10%? 21%? Not a bad return for the credit card company.

But how can you capitalize on lending money? I’m willing to bet that you don’t have hundreds of thousands of dollars to properly diversify a debt portfolio nor the resources to properly collect payments. That’s where Prosper comes in.

Prosper.Com helps potential lenders make money by matching them up with potential borrowers and the minimum required to invest is only $50.

Here’s how it works:

• Borrowers sign up for an account with Prosper.Com
• Prosper verifies their identity and grades their credit on a scale that ranges from AA to HR (High Risk)
• Lenders bid on loans by stating what rate of interest they’ll accept
• Prosper combines the money from all the successful bidders to fund the loan
• Borrowers have the money automatically withdrawn from their bank account every month
• Lenders have the money deposited into their bank account every month

Prosper takes care of all billing and collections if necessary. All you have to do is diversify your portfolio to minimize your risk..

In addition, you can earn a great rate of return. I’m watching a loan now for someone with AA credit. It’s almost completely funded and the lenders are getting 18% interest!

If you’re interested in learning more about investing with Prosper.Com, you can read more about how to manage your risk on Prosper.

Popularity: 45% [?]

I recently wrote an article about The Three Most Profitable Stock Chart Patterns and it’s become so popular that I thought I’d follow it up with this article.

If you trade on one indicator alone, you will get burned. The markets tend to be fickle and no indicator is 100% effective. Stock patterns are nice because they’re easy to recognize and have a reasonably high level of accuracy. However, since technical analysis is based on probabilities, it’s prudent to have at least one way to confirm price direction. Using the right indicator(s) to confirm your predictions can increase the probability of a successful trade.

That’s where RSI comes in.

RSI stands for Relative Strength Index. The formula takes into consideration the average number of an underlying security’s up days vs. its down days in order to determine an overbought or an oversold condition.

Some traders will use RSI to enter or exit positions based on whether the security is overbought or oversold. The strategy seems easy enough, but that strategy has never really worked for me. I find that RSI is much more valuable in confirm signals rather than generating signals.

Here’s and example:

You can see that the price of USD/CAD looks like it hit a double top. A quick glance at RSI shows that the currency pair is losing strength. A divergence like this is a very powerful signal that a trend could be ending.

Here’s what happened to USD/CAD:

Not a bad little move huh?

There are hundreds of technical indicators. Some help you find trends, some indicate entry and exit points, and others work well for confirming signals. While chart patterns can provide good signals, you’ll need to have some way of confirming them if you want to improve your success ratio. For that purpose, RSI works well.

Popularity: 27% [?]

When I first started trading Forex, I took on a very aggressive strategy. I leveraged myself highly so I could exploit relatively short intraday moves. My Forex strategy didn’t work very well for me at first and I lost about a third of my investment in one day.

After the New York market closed I decided to revisit my trades and evaluate why I opened each position and why I placed my stops and take profit orders where I did. I noticed that in almost every instance my analysis was correct and the price of the Forex pair I was trading DID go in the direction I thought it would; but only AFTER I’d been stopped out. I was setting my stops to tight.

The fear of losing money was causing me to lose money.

This realization sparked an epiphany. Like some movie, little snippets of things I’ve read came rushing into my mind:

“Starting passive income streams is a lot of work.”

“97% or MLMers fail.”

“Most Forex traders lose money.”

“95% of affiliate marketers fail.”

Then it hit me. No one fails at trading or developing passive income streams. No one fails in their attempts to build an MLM business or become an affiliate marketer. All these people just quit. They don’t put in the necessary money and effort to make their business a success and then quit when money doesn’t appear from thin air.

It’s unfortunate that many passive income businesses are billed as an easy way to get rich. It encourages people who don’t really want to work to get into these businesses. The truth is that it takes a TON of work to develop passive income streams. Its thankless work too and there’s very little benefit in the beginning.

Passive income businesses require that you “prime the pump.” You have to be willing to put in hours of effort for what can sometimes be months without seeing any meaningful return. You also need the intestinal fortitude to toss your money into a money pit that just keeps taking and taking without giving much back. Most people can’t do this. They assume that their business isn’t working and they close the doors.

But for those elite few who have the tenacity to stick it out, they’ll find that one day their ravenous monster of a business won’t eat any more money and doesn’t want the attention that it once demanded. It’ll burp up a few dollars at first, then start spewing money. At this point, your passive income business becomes truly passive. Once your business reaches this stage it only requires a little time and money to maintain it. But most people never build their business to this point. Most will quit long before their business is profitable.

As you begin to build your streams of passive income, you’re bound hit a few hiccups. My little Forex faux paus taught me not to fear losing money. It also taught me not to give up when I do lose money. Failure, loss; they’re inherent in all new ventures. You can choose to accept your loses as a cost of doing business and learn from your mistakes, or you can pick up your ball and go home. The choice is yours, but only one option will make you wealthy. Choose wisely.

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Popularity: 43% [?]