Lightspeed vs TradeZero

Big boy brokerage firms like TD Ameritrade, and Charles Schwab have one thing in common, i.e., punitive rules that lock out most upcoming traders. Good news? Smaller yet versatile brokers exist to save the day.

Two of them, namely Lightspeed and TradeZero are fierce rivals. They both are highly competitive and insured (effectively ensuring that your deposits are safe with them).

But which one of the two is better than the other? We delve deeper into the key differences between TradeZero and Lightspeed.

Recommended

TradeZero

Overall Rating: 4.6/5

LightSpeed

Overall Rating: 4/5

About LightSpeed

Lightspeed was established in 2006 and is based in the US cities of New York and Canada. The company specializes in low commission brokerage services mainly targeting novices and advanced traders. It offers different kinds of accounts including Regulation T Margin, Portfolio Margin, Separated Managed Account.

As a beginner-oriented broker, Lightspeed seeks to make the process of account maintenance as painless as possible and, therefore, doesn’t charge any fines for inactive accounts.

About TradeZero

Tradezero, on the other hand, has been around since 2015. It was initially only based in the Bahamas and targeted the global markets excluding the US, Canada, and the Bahamas itself.

However, in 2019, the broker opened a subsidiary in the US with its headquarters in NYC. One thing worth noting about Tradezero is how beginner-friendly they are. They are simply about removing the restrictions that investors have to contend with when dealing with the big retail-based brokers out there.

Plus, just like Lightspeed, they don’t charge account inactivity fees.

The Key Differences Between Tradezero and Lightspeed Brokerages

As we have mentioned, these two platforms focus on budding investors. So, what are the differences between them? It’s time to compare them on an apples-to-apples basis.

1. Insurance and Regulation

Primarily based in the Bahamas, Tradezero has always been away from the scope of US-based regulators and insurers. For that reason, people trading with the global-oriented Tradezero are insured by Bahamas First General insurance company as well as Lloyds of London (based in the UK).

However, in 2019, the company opened a US wing which is based in New York and duly regulated by FINRA and SIPC.

As for Lightspeed, what you get is a company that is solely based here in the States. As such, it always (and has always been) regulated by FINRA, SEC, and SIPC. And to provide you with an additional layer of safety, they are duly insured by the Lloyds of London.

What does this mean? For traders based out of the US and Canada looking to avoid the strict rules of FINRA, TradeZero global offers you a unique platform that is properly regulated and insured.

2. Minimum Capital

This is yet another key factor to always keep in mind as a day trader. And to that effect, Lightspeed has requires you to deposit at least $25,000 to your account so you can begin trading with them. 

Obviously, TradeZero global is able to avoid such rules because it operates from out of the US. For that reason, you can set up an account with them from as little as $500. Yup, you read that right.

As for TradeZero USA, you need to commit at least $2,500 for an account. That’s still 100x lower than the Lightspeed requirement.

So, if you’re looking to start really small, go for TradeZero, their minimum capital requirements are simply unbeatable.

3. What About the PDT Rule?

The Pattern Day Trader (PDT) rule defined by FINRA requires day trading accounts to have a minimum of $25,000 in order to trade without restrictions. And that is precisely why Lightspeed has $25K as its minimum trading capital.

So, how then does TradeZero manage to have US people opening brokerage accounts for $2500? The devil is in the detail. The PDT rule clearly states that you can open a maximum of 3 round-trip trades on consecutive trading days per week. So, if you trade with Tradezero (US), you’ll be restricted to 3 trades per week. For unlimited trading, you’ll still be required to have a minimum of 25K in your account.

Luckily, TradeZero global users are not subject to these rules. So, one can set up an unlimited account even with the $500 minimum requirement.

4. Leverage

Leverage trading is good in the sense that it empowers you to make more cash even when you have a small account. But there’s a catch, the higher the leverage, the higher the likelihood of getting your account wiped out should you get the trade wrong.

Ordinarily, most brokers are pretty rigid as far as leverage is concerned but TradeZero is different. Accounts between $500 and $2499 are allowed to trade on a 4:1 leverage while those above $2500 can toy with a 6:1 leverage.

Lightspeed leverage rules are pretty strict. For instance, all you can get with a $25,000 account is a 4:1 leverage. And that reduces to 2:1 at night.

What that means is that Lightspeed offers limited buying power compared to TradeZero. So, if you’re looking to squeeze as much juice as possible per trade, the latter might be a safer bet for you.

5. Nationality Restrictions

The world has become a global village. Conventional national boundaries rarely apply when it comes to online business.

However, some brokers have to impose national restrictions owing to the rules and regulations they are subjected to.

For example, the Bahamian branch of TradeZero restricts US, Canada, and Bahamian citizens from signing up. If you’re in any one of those three countries, you’re better off working with TradeZero USA.

On its part, Lightspeed has no nationality restrictions. They accept anyone and everyone provided that individual is capable of meeting their requirements. 

We think Lightspeed has a clear edge over TradeZero on this frontier. Would you agree?

6. Of Zero Commissions and Other Stories

Just as its name suggests, TradeZero offers some equity orders at zero commissions. Yup, you read that right. The catch is that those orders have to be “unmatched limit orders.” This is an order that allows for an open position to be closed at a specific price provided the remaining portion of the trade can be canceled.

Otherwise, all other orders on TradeZero attract commissions. That’s the same case with Lightspeed whereby a minimum commission of $1 per trade applies.

7. Learning Resources

First and foremost, we have to clarify that none of these two brokers provides specific training on trading skills. They also don’t provide alerts or signals.

The kind of training they provide you with is one that enables you to use the software better.

In our view, Lightspeed has way better learning resources than TradeZero. We’re talking about Webinars, regularly updated blog articles etc.

Its rival, on the other hand, isn’t doing badly on this frontier but we feel that they have room for improvement. For now, all you get are pre-recorded videos and a blog that is not updated that often. 

8. Customer Support

Both brokerage platforms have invested heavily in customer support. But if we were to compare them, pound for pound, TradeZero seems better.

Why so? Because they provide live customer support. This means you can chat with a helpful member of their support team in real-time, 24/7.

The Lightspeed customer support team, on the other hand, is still passive. You have to either call in or email them and wait for a response.

Final Verdict

When it comes to comparing Lightspeed and TradeZero, you’ve got to appreciate the fact that the two brokerage firms are in it to win. Lightspeed has a more established track-record and is open to all nationalities.

TradeZero is more versatile and beginner-friendly. Plus, with their US branch now open, you get a broker that is trustworthy and adequately regulated.

The call is yours to make!