One of the newest online discount brokers that has caught my eye is TradeMonster. In conjunction with OptionMonster.com, TradeMonster is an innovative online brokerage specializing in active trading, options trading, and robust stock trading platforms with low, affordable fees to boot.
TradeMonster launched in late 2008 to serve the investment community as a hybrid of sorts between Etrade and TradeKing. The company was co-founded by Jon Najarian, Pete Najarian, and Dirk Mueller, three professional traders who built an online brokerage that they and other like minded investors could use. Now that we’ve covered some background information, let’s get under the hood of TradeMonster and take a look.
TradeMonster’s Biggest Benefits
The two biggest benefits of TradeMonster are:
- Free TradeMonster Paper Trading Accounts
- and Flat Rate $7.50 Commission on up to 5k shares
Practice Trading Stocks for Free with paperTRADE
TradeMonster is undoubtedly the first ever online discount brokerage to offer practice paper trading accounts to their clients. TradeMonster explains its trademark paperTRADE as a way to :
Practice online trading without risking your hard-earned dough. Open a tradeMONSTER account to get access to paperTRADE to virtually trade stocks, covered calls, iron condors, and other complex option spreads online.
This is definitely a novel concept because now investors can open a free TradeMonster account, pay zero fees, experiment with the TradeMonster platform using virtual stock and options trades while still having access to all the tools, charts, and resources of the real money account holder. Kind of like a Free trial with TradeMonster. No money upfront, thus no risk involved other than your precious time.
Paper Trading Video Demo
My guess is TradeMonster wants to accomplish a few things by offering free access to its trading platform like:
- Show off its rich, state of the art trading platform
- Create a low risk situation to give investors zero excuses for not simply trying their services
- Bully other discount brokerages to offer comparable free practice accounts in the future
- and finally gain a large market share within a short period of time…similar to how Zecco shook the investment community by offering $0 stock trades during its initial launch phase
Regardless of TradeMonster’s true intentions, I am paying my full attention and am quite impressed.
TradeMonster Commission & Fee Pricing
- Stocks & ETFs: $7.50 Flat Rate Per Trade
- Single Leg Options Orders: $.50 per contract ($12.50 min)
- Multi-Leg Options Orders: $0.50 per contract ($7.50 min per leg)
- Mutual Funds: $15.00 per trade (Free to Sell)
- Bonds: $15.00 per trade
- Margin Rate: Fed Fund Rate + 3.25% (Becomes cheaper with increased levels)
- Minimum Opening Account Balance: $2,000 in cash and/or securities
Stock Fees: Higher than $5, but We Like the Flat Rate
TradeMonster drops the ball a bit with its over $5 stock trades, however its flat rate pricing model does help make up for the extra cost per transaction. Online brokers like Etrade provide a similarly robust trading platform, but TradeMonster has managed to cut its fees by almost 50% in comparison to its peers. Bravo, TradeMonster.
Options Fees: $12.50 Flat Rate Up to 20 Contracts
TradeMonster normally charges only $0.50 per contract, but that’s only if you purchase more than 20 options contracts. Less than 20 equals a flat rate of $12.50. This is a much better value than TradeKing ($0.65 per contract) or OptionsXpress ($0.75 per contract) if you plan to buy more than 20 Options contracts. We think this is a great bargain when compared to the bulk of online discount brokers, however most discount brokers target stock and mutual fund investors. TradeMonster does very well in the options pricing department.
Mutual Funds: $15 to Buy; $0 to Sell!
I never remember hearing about a broker charge $0 to sell a security unless it was related to stock trading. TradeMonster must be one of the only discount brokers to offer $0 mutual funds trades to its clients. Imagine buying Mutual Funds through TradeKing or Etrade, and having to pay 2 commissions just to buy and sell. You can make double the trades with TradeMonster and still break even compared to most competitors
Bonds: $15.00 Flat Rate. Simple
I don’t believe TradeMonster attracts a bond buying audience, but you can purchase Treasury Bonds, Agency Bonds, Corporate Bonds, or Municipal Bonds if you wish to diversify your assets even more. TradeMonster offers a very competitive bond pricing structure.
Margin Rates: Fed Fund + 3.25%
I don’t recommend buying on margin to most investors, but if you know what you are doing, TradeMonster offers some extremely attractive margin rates. It goes by the current Fed Fund rate + 3.25% for debt balances $0 to $50,000. Most discount brokers charge around the 6% interest range for a similar balance. TradeMonster probably maintains a large percentage of margin traders than most discount brokerages. That may explain the cheaper than usual margin rates.
$2,000 Account Minimums
I’m disappointed with the high account minimum. Ever since Zecco came around, I have seen zero account minimums become standard practice by brokers like TradeKing, Etrade, and many others. This shuts out a lot of investors from actually becoming paid clients.
Account Opening Process
Like with most online brokers, we must endure the process of filling out an account form. TradeMonster’s account opening process is broken down into 4 main steps:
- General Personal Information
- Trading Information
- Rules, Regulations, and Legal Stuff
- Account Finalization and Approval Waiting Period
It takes about 5-10 minutes to fill out the first 3 forms. One unique thing about TradeMonster is its digital signature process. You must sign your name using your mouse to confirm all your application before hitting submit. I’ve never seen this before, and it was extremely difficult to sign my name using my computer mouse. I thought this step was unnecessary and quite silly.
After you hit confirm, you will be presented with a confirmation message on the screen, along with 2 welcome e-mails. It takes about 1 business day for your application to be verified so be patient.
TradeMonster Trading Platform & Tools
The most unique quality about TradeMonster is its trading platform. Some of its powerful unique features are:
- paperTrade: its virtual trading practice account that simulates a real money trading environment
- Trade Simulation: allows you to use your current portfolio and simulate the effect of adding a “fake” stock or option position. This educational tool allows you to practice new strategies with your existing portfolio.
- strategySEEK: strategySEEK takes you from symbol to strategy in 3 easy steps. Simply input your forecasts and risk priorities and strategySEEK will scan thousands of option strategies for the ones most appropriate to your criteria.
- tradeLAB Spectral Analysis: Analyze strategies using the power of visualization. Our patent pending technology includes a color-gradient Spectral Map lets you visualize how your option strategy experiences profits and losses between the current day and option expiration for any path the underlying might take.
- tradeLAB Snapshot Analysis: Before you trade an option strategy, you´ll want to assess your risk vs. your reward. Snapshot Analysis let´s you do this in one click. You´ll see in a single screen your risk/reward ratio, key probabilities such as probability for any profit, a risk profile graph, key data such as the date of the next earnings announcement and more.
- TradeMonster Twitter Integration: TradeMonster is fully integrated with Twitter so you can tweets your trades. If you’re a StockTwits user like men, then you’ll love this!
- Exit Plan: designed to help you understand what exits are available in any given trade and creates exit strategies that will help minimize potential losses and lock in potential gains.
- spreadMAKER: An innovative trading tool that allows you to build option spread trades quickly, efficiently, and easily.
- adjustTRADE: a tool that assists you in creating an adjustment for a strategy, including simply closing the strategy.
- Free Real-Time Streaming Quotes & Charts: You need 25+ trades with TradeKing or Power Etrade status to unlock the same service that TradeMonster provides to all clients for free! Awesome
Personally, I believe in the 80/20 rule meaning that 20% of TradeMonster’s tools will provide you with 80% of your desired results. Tools like paperTrade, Trade Simulation and Exit Plan are must have resources for every investor. tradeLAB and StrategySEEK are extremely helpful for more advanced traders.
TradeMonster Customer Service
Customer support is important because things always seem to go wrong at the worst possible times (think Murphy’s Law). TradeMonster provides customer support via Phone, Fax, E-mail and Regular postal mail. Their hours of operations are 8AM to 7PM EST Monday through Friday and 9AM to 1PM on Saturdays. Most brokers only offer live customer support during business days, so I’m very impressed with Saturday service just in case problems that occurred on Friday need immediate attention.
TradeMonster Education Center
Like most brokers, TradeMonster provides a very basic educational center filled with:
- Trading Basics Articles
- Trading Strategies Articles
- Webinars & Events
- and a Trading Glossary
For all the value TradeMonster offers in tools and fees, I think they need to work a lot more on their educational center. TradeKing and Etrade go way beyond education in their businesses, and basically hold your hand whether you’re a novice or seasoned investor. With all the complex resources at your fingertips, I was pretty shocked at the bare bones trading education knowledge center.
TradeMonster Pros and Cons
- Reasonable Pricing Structure
- Cheap Options Trades
- No Sell Fees for Mutual Funds
- Lower than Standard Margin Rates
- Unique, Robust Trading Platform
- Live Customer Support on Saturday Mornings
- Free Paper Trading Account
- No Fee IRA Accounts
- Frustrating Digital Signature During Signup
- Slow Account Processing Wait
- No Trading Community
- $2,000 Account Minimums
- Low Advertising Budget
- Basic Education Center
TradeMonster Final Verdict
In my opinion, TradeMonster is good for:
- Active Traders
- Swing Traders
- Seasoned Investors
- Technical Analysis Traders
TradeMonster is not so good for:
- Buy and Hold Investors
- Novice Investors
- Retirement Investors
- Fundamental Analysis Traders
I think TradeMonster built a novel product that provides tons of value to its target audience. It’s always nice to see some new blood in the discount brokerage industry, and I will surely keep an eye on them in the future.