Day trading has become popular in recent years thanks to easy access to powerful computers and high-speed internet connection. However, it’s worth being aware that successful day traders need several tools, including a concrete plan and a decent trading platform.
Today, we’re going to tell you everything you need to know about day trading and provide you with a list of the best day trading platforms for day traders.
What is day trading and how does it work?
Day trading is the process of buying and selling of financial securities such as stocks, futures and exchange traded funds (ETFs) on the very same day. Ideally, the aim of a day trader is to try and take advantage of short-term, oftentimes small changes in the price of a security.
Day traders use certain trading strategies that are based on patterns, swings or historical trends in the market. Some day traders also buy securities on credit (also known as margin) through online brokers to leverage, thus allowing them to control more sizable positions realize higher gains or losses.
To day trade stocks, traders have to maintain at least $25,000 in their trading accounts on any day that they trade in order to comply with the Pattern Day Trader (PDT) rule. They also have to meet certain requirements when trading on margin. These rules are enacted by the government to protect investors.
Risks of day trading
Like most financial vehicles, day trading also has its profit potential and a high risk of losing money if not approached properly.
In other words, there is really no way to know for sure what will happen with any particular stock or in the market. This makes trade management paramount when day trading.
For that reason, it is advisable to limit your loss potential by allocating only a small portion of your capital to day trading, unless you are planning to become a full-time day trader.
Always remember that successful day trading requires perseverance, self-discipline, and an incredible amount of knowledge.
One of the most frequently asked questions about day trading is: “How much money can I make as a day trader?” When it comes to day trading, there is a massive range of profit potential.
Some day traders manage to make some little money from the market each month, but often have to work another job to supplement their income.
Then there are those who are able to make a comfortable living as day traders and there is the small group of people who make a lot. There are also people who try their luck in the day trading world and end up failing and losing money.
That said, profit potential in day trading is largely determined by:
- The market you trade (are you trading stocks, exchange-traded funds (ETFs), or futures?)
- The amount of money you start with
- Your trading strategies
- Market volatility
- Your level of patience and discipline
- The amount of time you spend in your trading education
Now, let’s go through some of the factors that you should consider when choosing the best day trading platforms.
What makes the best day trading platform?
High execution speeds, low commissions, and reliability are some of the things that you need to place a premium weight on when looking for the best day trading platforms.
A trading commission is a fee that is charged by a brokerage as compensation for executing a transaction. Brokerages often calculate commissions either as a flat fee or a percentage of the transaction value.
As a day trader, the fees and commissions charged by online brokers should be important to you since you are likely going to execute a large number of trades per month. Luckily, online brokers have been rapidly cutting commissions to zero on some of their most popular offerings, including stocks and ETFs, thus giving traders the ability to access free trades.
- Execution speed
Day traders usually place a huge emphasis on trade execution speed as even a few seconds difference can leave them without a viable trade. Thus, it is important to choose an online trading platform that offers rapid order execution.
Indeed, many trading platforms understand that time is of the essence in the world of day trading and this why they often highlight execution speed as a crucial constituent of their features list.
- Advanced charting
Whatever your day trading strategy, you will need to test a few platforms to see which offers advanced charting and technical analysis. Advanced charting applications, custom indicators and technical analysis tools are important because they help day traders to interpret market data within short time frames.
- Stable platform
A general rule of thumb for day traders is to choose an incredibly stable and reliable platform for high-quality trade execution. So, ensure to pick a platform that isn’t going to become unstable when there is a surge in trading activity.
- Hotkeys available
Being able to click one key and execute an order is very important for both beginner and professional day traders. Creating your own hot keys that you will remember and execute on demand will help you on your day trading journey.
What is the best day trading platform?
A trading platform is a software program that processes buy and sell orders involving financial securities in an electronic marketplace.
he ability to place buy and sell orders upon the market, apply charting techniques and stream live market data all depend upon the market access provided by the trading platform to the trader.
Our favorite day trading platforms:
- Sterling Trader Tech
Let’s now take an indepth look a list of the best online trading platforms for day traders.
Lightspeed is without doubt one of the best trading platforms for active day traders today.
Headquartered in New York City, this firm provides extremely cost-efficient brokerage services to proprietary trading firms, hedge funds, and professional day traders who trade a lot ‘at the speed of light.’
Although the cost of trading is low with Lightspeed, traders will have to maintain a higher account minimum than other brokerage firms.
Lightspeed offers advanced charting, free demo accounts, fast execution speeds and automated trades, though you will need to pay extra to access certain features.
- Very fast execution speeds with low latency
- Free demo account to help you create your trading strategy
- Highly competitive commission rates
- Fully customizable and innovative trading platform
- Risk management tools
- Not ideal for passive or beginner traders
- You need a minimum of $10,000 to create an account with Lightspeed
- No mobile app
Sterling Trader Tech
Unlike Lightspeed, Sterling Trading Tech is not a broker. They are a leading provider of trading technology solutions for equity options, futures markets and global equities. They offer white label trading software designed to support both professional trading firms and active individual traders.
Sterling Trading Tech gives traders access to markets in the United States, Europe, Shanghai, Brazil, Canada, and Hong Kong. Traders can search for trade targets using state-of-the-art scanning tools. In addition, their charting tools have 60 configurable settings.
- Real-time market data
- Fast, stable trading platform
- Customization hot keys
- Great customer support
- Portfolio management tools
- Supported by multiple brokers
- Advanced charting
- Not ideal for beginner traders
TradeStation is a leading online brokerage service that was founded in 1982. They are headquartered in Florida and focusses on providing industry-leading trading solutions along with great commission structures and customer service.
Their trading platform is rich with graphics and fully customizable with powerful scanners, research center, one-click trading, and robust charting capabilities.
TradeStation’s coding language, EasyLanguage, allows you to create powerful trading strategies, back-test them, and then activate them to trade their accounts based on their risk tolerance.
Traders can also customize trading indicators, then sell them along with trading strategies on the TradingApp store where apps can cost up to hundreds of dollars per month or run for free.
- High-quality trading platforms
- One-click trading
- Commission-free stock, ETF and options trades
- Industry-leading technology
- Comprehensive research
- Superb customer service
- Not ideal for new traders looking to learn the ropes because the fees can go up if you are not trading enough
- Access to advanced platform requires TS Select
- No transaction-fee-free mutual funds
Day trading is a time-consuming and challenging endeavor. At the end of the day, it all comes down to developing good trading strategies and picking a decent online trading platform that has lower costs and meets your needs.
Numerous platforms are available, and it is possible to find a reliable and cost-effective platform for the job.