A Commission-Free Broker is an online platform in which you can trade stocks easily. For nearly all of investing history, you had to pay some sort of fee whenever you wanted to trade a stock. However, many brokerages are starting to get rid of these fees and move over to different forms of monetization.
In this article, we aim to quickly describe the basics of Commission-Free Brokers and give some of the most popular examples of them. With that being said, let's get into it:
Robinhood
Robinhood is definitely the most popular and most recognizable commission-free brokers out there. It is known for paving the way for commission-free brokers to start and is one of the most popular apps in the Apple App Store. However, Robinhood is not ad advanced compared to some of its competitors, mainly due to its lack of tools and researching information. Unlike many other brokers, Robinhood does not have a built-in screener and does not allow you to use technical indicators on the mobile app (but is available on their web client).
Robinhood is known for its complete simplicity and a great choice for investors who want to trade stocks casually. If you are looking to make a new Robinhood account, be sure to set one up through another investor's referral link. This allows yourself and the person who referred you to each obtain one free stock, courtesy of Robinhood.
Overall, Robinhood is a great broker for casual investors who are just getting started. It allows for free, simplistic trading with any amount of money.
Webull
Webull is becoming a new favorite among traders all around the world for its advanced tools, yet also user-friendly design. Webull is a Chinese commission-free broker founded by Alibaba, available on the web and through the mobile app. While many investors are skeptical of this broker due to it being based in China, they have proven to be completely trustworthy over the years and have revolutionized their field.
Webull is becoming exceedingly more popular among social media influencers, especially those on YouTube. This is because of their advanced tools they offer, such as screeners, insider activity, market maps, and much more. Webull also often offers multiple free stocks when creating a new account through a referral link, with as many as 4 free stocks given. Be sure to sign up through a referral link through another user, or even through an influencer's referral link.
All in all, Webull is a fantastic platform that is on the rise due to it completely changing commission-free brokers by offering more advanced tools and better research to its users.
TD Ameritrade
The final commission-free broker we are going to mention is TD Ameritrade. This broker is known for its amazing charts and research tools. Their stock trading tools, such as screeners, catalysts, candlestick charts, and more, are much more advanced and detailed compared to its competitors. However, TD Ameritrade does not have the simplistic setup compared to the other two brokers. TD Ameritrade is very popular among more experienced traders, especially among highly active day traders.
While TD Ameritrade does not offer free stocks through referrals, they do offer a referral bonus if the users meet all of the conditions. This can be a great reward for people who refer their friends or get referred themselves. However, it is much more difficult to find referrals since TD Ameritrade is not as popular as the previous brokers.
TD Ameritrade is the best option here if you are interested in trading very often (such as day trading) due to its exceptional tools provided by the platform. Just remember, this broker does not have a simplistic design like the others and is much more difficult to receiver any referral rewards.
How Do They Make Money?
You may be asking yourself, "How do commission-free brokers make money?" Here are some ways in which commission-free brokerages make money:
1.) Loans
These platforms often will take a large group of users' un-invested cash and loan it out to people. This allows the company to make money through interest on these loans over time. Just remember, your money will always be available to you when you need it.
2.) Selling to Buyers
Commission-free brokers may have deals with other firms that allow them to buy your sell-order just as you sell. For example, it you sell your shares for $20 each, they will inform the other broker they have a deal with and then they will buy your shares from you. This allows commission-free brokerages to make money every time an investor completes their sell-order and, therefore, profit massively.
3.) Bid/Ask Spreads
While this form of monetization is much less common for traditional stocks, it is becoming increasingly more popular. Here is an example of how this works: Say the bid (highest price someone is willing to pay for a share) is $1 and the ask (lowest price someone is willing to sell a share) is $1.01. Some brokers may automatically set the bid to $0.99 and the ask to $1.02, and then profits off of this $0.01 difference. This may not seem like a lot but it adds up significantly when you're talking about a huge amount of shares. Remember, this method is much more popular in Forex trading and not so much with traditional stock trading, but it is becoming more popular as the times go on.
Now, you hopefully understand what a commission-free brokerage is, some popular examples to use, and how they make money. There are many other choices of commission-free brokerages but the ones above are just some of the more popular ones. If you want to look into more options, some could be Charles Schwab, Interactive Brokers, E-Trade, Fidelity, and TradeStation.
Picking the right brokerage is a vital part of starting your investing path. Remember to always do more research into a brokerage before picking them. And be sure to capitalize on any referral rewards possible if the brokerage offers it, and share your referral code as much as you can to earn new free stocks all the time.