efore Fall 1997, AmeriTrade, an online discount broker, didn't even exist. But barely a week after it was born, the upstart was running TV ads between innings of World Series games. Its simple message: You can buy any amount of any stock you want for a commission of only $8 - less than the price of a few beers at the game.

Within three months of its inception, AmeriTrade was spending $20 million touting its dirt-cheap commission fee, the lowest in history. It's the latest salvo in the battle for online trading clients, a war that has now been joined by dozens of upstart brokers.

Until recently, more than 80 percent of all the discount business belonged to a handful of blue-ribbon firms such as E-Schwab (35 percent), Fidelity and E-Trade (13 percent each), Quick & Reilly (10 percent), PCFN (6 percent) and Discover (4 percent).

The rates these established discounters charge for buying and selling stocks, bonds and mutual funds look especially attractive when compared to full-service brokers' commissions. For example, if you use Merrill Lynch to buy 500 shares of Microsoft, the commission might be $525. The discounters will charge from $8 to $40 for the same trade.

Some 70 or more online discount brokers are now in business, and they fall into three categories: deep-discounters (less than $20 per trade), middle-cost brokers ($20 to $30) and higher-cost ($31 and up) discounters.

The market they are battling for is mushrooming. New customers include computer-literate refugees from full-service firms as well as novices making their first forays into stocks and bonds. And discounters make it very easy to get started.

Forrester Research estimates there are some 3 million online investing accounts in the United States. The Cambridge, Mass. firm, which studies the impact of technology on investing and consumer habits, also estimates that online trading will multiply nearly fivefold in the next five years, to 14 million investors.

Put another way, by 2002, one of every five households in America with online access will invest through an online broker. The onliners will then account for about 5 percent of the total number of traders.

Today, online investors have about $120 billion in their investment accounts; Forrester expects that to reach $688 billion by 2002.

The large, full-service brokers are hardly panicking, however. They're too busy making more money than ever. In the third quarter of 1997, Merrill Lynch - which alone claimed 7.2 million retail customers - reported record quarterly earnings of $493 million, a 49 percent increase from the previous year. Merrill Lynch also announced it had cleared the trillion dollar hurdle in client assets.

Other full-commission brokers reported similar record earnings. For now, they are pooh-poohing the online war, while quietly mounting their own defenses.

Why is online trading so hot? It's faster, easier and cheaper to trade online than calling a full-service broker. You can access your portfolio 24 hours a day and submit trades even when the market is closed. You get prompt execution and confirmation of your trades.

E-Schwab recently ran full-page newspaper ads touting its online service vs. calling a full-commission broker. Elapsed time for the electronic trade: 15 minutes. In Schwab's full-commission broker scenario, which involves a predictable amount of telephone tag and a broker's attempt to talk the customers into buying something else, the trade takes more than seven hours to perform and confirm.

Besides speed and low cost, discounters also may offer better margin rates to customers. A few percentage points can be critical to active traders who borrow against the value of their portfolios.

Of course, the knock against discounters is that you get great transaction speed and prices, but nothing more. However, some discounters do pile on extras such as research, real-time stock quotes and even the option of dealing with a real, live human.

How do you know what discounters are out there, what services they offer and at what cost? Our list of online discounters comes from analyst Don Johnson, who makes a living tracking them. Johnson's report shows the online firms' commission rates, margin rates, research help available, telephone support and any extras.

Only about half of these brokers make money now. In their quest for new customers, the come-ons can get wild. One broker, for example, allows you one free trade on your birthday.

Avoid the temptation to select a discounter based on price alone. "Personally, I think people should focus on acceptable service first," Johnson notes. "After that, they can worry about commissions."

Look at the minimum deposit the discounter requires to open an account. Some brokers don't require any deposit, while others demand $10,000 or more. Additionally, check carefully into minimum trading balances needed to qualify for the best commission rates, margin rates and other services.

System accessibility is critical. Some online customers report they're consistently able to get connected to perform trades, while others complain that their online brokers can be impossible to reach, particularly on heavy trading days. While that may not be an issue for someone who trades once a month, active investors need easy system access. Hint: visit the broker's Web site on a hectic day. If a system seems sluggish or hard to get into, that should be a red flag.

Every computer user knows that any online system can crash. That's why telephone backup is so important. Some of the cheapest online brokers fail to offer any sort of phone system to perform trades; others levy a substantial surcharge for such services. One, for instance, slaps an extra $15 commission on every telephone trade. That can make those tasty online commissions a bit less juicy if you constantly have to phone in orders at additional cost.

When shopping around, ask if the service offers telephone trades, if such trades cost extra and what sort of staff is available to handle call loads. Check out the hidden cost of other services, too. For example, some brokers levy an additional surcharge for current stock quotes, generally $30 a month, unless you are an active trader.

Look at the fine print, too, to see if those low commissions are good for all stocks and for trading any particular allotment. Many online brokers limit cut-rate commissions to stocks listed on the major exchanges, or orders of a certain size. That can leave you paying a premium for over-the-counter stocks, bonds and particularly large trades.

Note: If you're interested in mutual funds, the deep discounters aren't for you. Most don't offer them at all. But large discounters such as Schwab and Fidelity offer thousands of them. (Fidelity alone offers some 3,500 mutual funds online.)

Dirt cheap brokerages also don't offer services such as research, news and analysis or even the option of chatting with a human being about your investments. That may prove unnerving to some, particularly novices who don't have other research resources at hand.

Visit any brokerage's Web site in which you're interested to see what's actually there. While some offer a comprehensive array of news, research reports and like services at the site itself, others merely provide links to other sites that you can usually get for free anyway.

There are some investors who should never have anything to do with online brokers, or at least not with the deep discounters who offer only the lowest prices and no advice.

If you need a lot of hand-holding about investing, stick to a full-service firm. They offer a smorgasbord of financial products as well as financial planning and other advice. "We give our clients real long-term financial planning, not just performing trades," says Merrill Lynch spokeswoman Bobbie Collins.

If you are at all impulsive, don't sign up for an online account. It's too easy and too fast for you to abuse. Remember, there is nothing between you and the floor of the exchange except your computer.

Discounters will never have the lion's share of the retail investment business precisely because so many customers want and need more than performing trades. And the discounters know this. On the flip side, full-service brokers know they will continue to lose customers who want lower commissions and the convenience of online access.

This explains why there is a movement toward a more common ground between online brokers, full-service brokers and other financial institutions. For instance, Merrill Lynch recently introduced an online service for clients which allows online trading (albeit at the firm's usual commission rates). Other full-service brokers are following suit, if for no other reason than everyone seems to be doing it. Quips one full-service broker in a recent research report, "We'd be left in the dust if we didn't do something."

By the same token, cut-rate online companies are expanding to offer more traditional services. For example, in addition to its $8 online commission rate, AmeriTrade lets clients trade via a broker for $18. For a new client who isn't a very active trader, that can be $10 well spent.

Moreover, Forrester senior analyst Mike Gazala expects banks to muscle their way into a bigger online presence, offering a "supermarket" of online financial products including stock trading, banking, insurance and other services. Banks also have the added advantage of a roster of online banking customers who may eventually be enticed into additional products.

"Clearly, consumers have come to question why they're paying $300 in commissions," Gazala muses. "That means the end has come to paying several hundred dollars for a stock trade without asking why. The consumer is the real winner in this."