Rather than purchasing and holding onto a stock or sitting on an option for weeks or months, day traders take trading to the short term by buying and selling stocks within the same day. As with any investment venture, the higher the risk, the higher the potential payoff. Day trading is high risk and sometimes offers high payoffs, which is also what attracts many to it. We recommend you understand the risks and requirements involved with day trading before entering the day-trading game.
Along we strict day traders, we considered platforms preferable for active traders – those who may hold positions overnight and those who trade more than a handful of times a month. We have included mostly online stock trading services and a few desktop platforms to our lineup. The most popular names in online stocks trading, such as OptionsHouse, TradeKing and optionsXpress, offer platforms ideal for day traders. For more information on day trading, have a look at our articles on day trading software.
When you trade on a regular basis, fees and commissions add up, so for many traders, cost is the most important consideration. The platform and tools a service includes are also integral, as day traders require advanced and in-depth analysis of stocks and the market. The level of mobile access you desire is also important to consider as not all mobile apps provide the same features and functions. If you're new to the market or day trading in particular, also consider the educational resources and support offered.
Fees & Commissions
You pay commissions for all trades you order. Option trades most often have a base fee plus a per-contract fee. The per-contract fee is more important than the base if you plan on high-frequency trading. Also, consider the cost of an option exercise and assignment as these fees range from $5 up to $30. If you require assistance when completing an order, many service charge a fee for broker-assisted trades.
Margin accounts are commonly used for day trading where you borrow money from your broker to trade securities. For pattern day traders – those who order four or more trades in a rolling five-day period – the Financial Industry Regulatory Authority requires a balance of $25,000 or more in your margin account at all times. Your broker charges interest on the loaned amount, and rates decrease as your balance increases. Interest rates vary from service to service, including the way in which they determine their rates. Rates are always subject to change.
Trading & Investment Tools
All platforms include certain tools and features. Watch lists, option chains and real-time quotes are all standard in day trading services. Most services offer analytic charts and reports to help you speculate on the future performance of a stock. Other useful tools include a profit-versus-loss calculator and options probability calculator. Portfolio risk evaluators are nice features that allow you to assess the performance of your portfolio and keep it focused on the direction you hope to see it go.
All services we reviewed deal with typical investment vehicles. You're guaranteed to be able to trade stocks and options. Nearly every service offers trades with ETFs, bonds and mutual funds, but some do not, so if you're interested in those investments, be sure your broker offers them. Most services we reviewed do not deal with high-risk investments, including forex and futures, and many do not deal with international markets.
All service we reviewed offer mobile trading to one extent or another. The best day trading services offer mobile apps for popular devices as well as a mobile-optimized website so you can trade within your mobile browser. At the very least, you can trade stocks and options with your mobile devices and some service allow you to trade other investments including ETFs and futures, if available. Some mobile apps have advanced features, including check depositing or barcode scanning, which allows you to scan a barcode and receive publicly traded information about the product.
Help & Support
Educational resources and support vary from service to service. Some services offer an extensive knowledgebase full of articles, webinars and videos. Companies with local branches often offer live events and seminars. All services offer typical help and support options, including a phone number and email address for customer service. Most have live chat as well. If the level of support a company provides is important to you, also look for services that offer 24/7 support.
As with all trading platforms and services, the choice comes down to preference, whether you're more concerned with the price, the strength of the platform, the company reputation or the level of support. The best day trading software on our lineup offer all of those facets. No matter which you choose, ensure you've done your research and understand the risks associated with day trading, active trading and any investment venture.