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CHOOSING AN ONLINE BROKER IS A LOT LIKE shopping for a car. If you're looking for good, all-around family transportation, you'll naturally want to check out the latest SUVs. But if it's power, speed and agility that you're after, nothing will do but a sports car.

Recognizing the different ways that Barron's readers trade online, we've split our annual ranking of online brokers into two pieces. Investors planning to do some basic trading -- perhaps up to 10 trades a month -- will want to look at the browser-based services, the SUVs of the field. They're easy to use, come with useful research tools and can be accessed from any computer with an Internet connection. More active traders, by contrast, should probably focus on the software-based models -- the sports cars. With these, your computer, rather than the broker's, crunches the numbers, and that makes it easier to customize the systems to fit your own trading style.

We've reviewed a total of 30 online brokerage services this year -- 18 of the browser-based variety and 12 based on software. We put each one through the paces, measuring its capabilities and user-friendliness in eight different ways. We also spoke with top executives of many of the brokerages. In the end, we assigned each offering a star rating of one to five.

The overarching conclusion: Online-brokerage services, as a group, are better than ever. Back when we started ranking online brokers, three stars got you near the top of the heap. Now, in our 10th survey, one browser-based broker and five software-based offerings each earned 4½ stars, double the number from last year.

In a remarkable display of consistency, optionsXpress, which took top honors in 2003 and 2004, did it again this year. The firm ( www.optionsxpress.com) was easily the leading browser-based brokerage, and its margin of victory was greater than that of the winner among the software-based brokers, Interactive Brokers ( www.interactivebrokers.com).

In the browser category, optionsXpress was followed by Ameritrade's Apex ( www.ameritrade.com) and Fidelity Investments ( www.fidelity.com). Among software-based competitors, Interactive narrowly beat Terra Nova Trading ( www.terranovaonline.com), TradeStation ( www.tradestation.com), thinkorswim ( www.thinkorswim.com) and MB Trading ( www.mbtrading.com). 

We rated both types of brokers on such considerations as the types of investments that can be traded online, the quality of screeners that help you pick stocks, options or mutual funds, the usability of the trading screens and a site's ability to be customized. We also examined the types of reports that the brokerages send to users, including printed monthly statements.

Based on input from about 150 Barron's readers, we tweaked many of the criteria and added an all-new rating measure -- trading technology. For each of the eight measures, we assigned a point value ranging from a low of zero to a high of five and then, for browser-based brokers, added up those points. For the software-based brokers, we assigned varying importance to each measure, based on feedback from our readers, and created weighted totals. We performed all our analyses with an eye to handling an online portfolio of about $100,000.

So, which type of online service is best for you -- an SUV or a sports car? If you trade for long stretches at a time from a single location and are willing to put in the time to customize the platform to your trading style, you're a candidate for a software-based broker. But if you pop into your portfolio just a few times a week, you may find that the work of running a direct-access application isn't worth the time.

Here are the gauges we used:

Trade Execution : Readers have told us to focus on the process of placing and confirming trades, which can be done only by working with a live account. We looked for smart order-routing technology, which finds the best bid or offer, and price improvement on limit orders, or purchases or sales at specified prices.

We executed equity trades during market hours, making market buys and limit sales of a Nasdaq stock or an exchange-traded fund. After the market buy, we evaluated the execution and portfolio reports. After entering the limit-sell order, we examined the open-order reports and looked at ways for the trader to follow the progress of the order, as well as ways to adjust the limit price or cancel the order outright.

This year, we placed options orders as well, and looked at order-entry screens for complex options trades, or simultaneous trades of more than one option. We also examined the order-entry screens for mutual-funds, bonds, and, when available, futures and currencies.

We broke the points awarded into several sub-categories, such as quality of the trading screen, design of order-entry screens for stocks and other types of investments and accessibility of order-status reports.

MB Trading, thinkorswim, and optionsXpress had particularly well-designed order-entry screens, including the ability to cancel and replace a previously entered order. Rushtrade, meanwhile, does a great job of linking from your existing holdings to a sell order, and pre-fills the order ticket with the number of shares you currently own -- a key factor that should help customers avoid an inadvertent short sale.

An overall score of five in trade execution means the order entry-and-execution process flowed easily from one step to the next, with real-time information available when needed. For software-based brokers, 50% was added to this score for the weighted total, to emphasize the need for well-designed and informative order-entry screens when trading quickly.

Trading technology : The availability of price-improvement strategies and smart-order routing technology, and the absence of internalized orders (trades in which the broker takes the other side), are necessary to earn a five in this new category. A broker offering price improvement -- a sale above the bid price or a buy below the offer -- for limit orders received a half point. A broker that has smart-order routing technology in place earns a half point. A broker that internalizes order flow for more than 25% of nondirected orders loses up to a half point. Many readers have told Barron's that they want to avoid

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