Despite the title of this review, Day Trading Software, we prefer online stock trading services to platform-specific software because they allow brokers to update features without forcing you to install something new on your computer. Furthermore, web access to your trading account frees you to access it from any web-connected browser. We do not define day trading in the strictest sense (a trade that begins and ends between the opening and closing of the stock market on the same trading day). Instead, we use day trading in the sense of casual trading, with more frequent trades than an investor but not enough to be called high frequency trading.
We expand the definition of day trader to include traders who might hold positions overnight rather than liquidating before market close every day. Therefore, if you are a day trader in the strictest sense and you make your living at day trading, then our review is not for you. Our focus is on what you might call “day trading lite.” Our review describes the best trading platforms from winning online discount brokers such as optionsXpress, OptionsHouse and Trade King. And don’t miss our articles about day trading software in the Learning Center.
When you are a trader rather than a traditional investor, fees and commissions add up, so consider them before you sign up with a broker. Day traders do not dabble in every kind of investment that stockbrokers make available, but you should look at what a broker offers. Some do not provide access to international stock exchanges, for example. Look at the tools that a prospective stockbroker provides so you know you'll have what you need to support your day-trading strategies. Pay attention also to the help and support brokers provide.
Fees & Commissions
Look for trading accounts that do not carry an annual account fee. If you use the web-based trading platform from your stockbroker, there will be a fee for online market trades, and sometimes a broker will charge extra if you require assistance on a trade. If you are using third-party, platform-specific software, you’ll see we have not listed the trade prices. The reason for that is trade prices depend on which broker you select from the installed computer stock trading software.
You can count on all of the online stock trading brokers in our review to allow daily trading of stocks, options, mutual funds and ETFs. Some but not all of the brokers in our review roundup are National Best Bid and Offer participants. NBBO participants must execute your trades for the best ask and bid price when you buy and sell securities. If you want to trade international stocks, you should be aware that not all of the brokers we review provide access to international stock exchanges.
If you are not a casual day trader according to our loose definition but a day trader in the strictest sense and you are still reading this article despite our earlier warning, we know that discount fees and commissions are not as enticing to you as direct access to the ECN (Electronic Communications Network) and "smart" order routing to NYSE/NASDAQ. Only one of the brokers on our matrix meets both those criteria, but two others meet the first, offering direct access to the ECN.
Access to price quotes is a basic requirement. The real-time, or Level I, quote is the basic level of quote: Level I quotes show the bid and ask prices for NASDAQ securities trading, but they hide who is bidding or asking for the stock. At that level, you will not be able to see how many shares a market maker is seeking. Although Level I quotes are indeed provided in real time, the quote may not be for the actual lot that you are trading. Because you cannot know the order sizes with Level 1 quotes, the market maker can pass your order around or hold it until it becomes more profitable for the market maker. Therefore, a day trader will do better with access to Level II, which shows quotes from the individual market makers that are registered in each NASDAQ-listed stock, along with exactly what they are looking for. Armed with this Level II quote data, you can understand which market makers are interested in a particular stock, and you can derive trading patterns and infer useful information to inform your trading strategy. Our Gold Award winner provides Level II quotes at no extra cost.
Other tools to consider are the ability to make automatic trades and to chart and graph market or company performance and behavior. You need access to news and analysts, so also consider the proprietary or independent research that a broker shares.
Help & Support
Day trading is not for the faint of heart – to give you an idea, many day traders, for example, have two computers up and running in case one goes down – and you will need all of the support that you can muster. Our Gold Award winner provides 24/7 access to help and support via live chat, telephone and email. Many brokers do not provide such a level of support.
The services we review here are not for day traders in the strictest sense of the term, but really for casual traders who trade more frequently than investors but sometimes hold positions for more than one trading day. If you are looking for an online broker to support your casual day trading, use our reviews to learn about each broker's pricing, investment types, tools, and help and support. If we cannot talk you out of day trading – a speculative activity that can result in financial ruin – then we can at least point you toward the brokers that are most likely to offer the best support for the practice.