The top performers in our review are OptionsHouse, the Gold Award winner; TradeKing, the Silver Award winner; and optionsXpress, the Bronze Award winner. Here’s more on choosing a system to meet your needs, along with details on how we arrived at our ranking of 15 companies.
Day Trading Software
Day trading is a more active approach to buying and selling stocks than basic stock trading. Rather than purchasing and holding onto a stock or sitting on an option for weeks or months, day traders work in the short term by buying and selling stocks within the same day. The exception to this comes with long-security positions that are held overnight and sold the next day before a new purchase of that same stock, or with a short-security position that is held overnight and purchased the new day before a new sale of that same stock.
The strategy behind this trading technique is to take advantage of small fluctuations within the market by buying low and selling higher, leading to potentially high profits. Most traders utilize leverage when day trading, using a variety of financial instruments or margin accounts.
However, day trading is a riskier business than simple stock trading. Learn more about the risk associated with day trading below. If you are looking for a less risky way to trade within the stock market, have a look at our beginner stock trading site. Or if you're looking for other high-risk trading opportunities, you can check out our options trading or Forex sites. For more information, check out our articles on stock trading.
Day trading is high risk and sometimes offers high payoffs, which is also what attracts many to it. While it is true the more you put into a trade, the more you could receive in returns, the opposite is also true. With day trading, it is recommended that you start small. The payoff will be less, but the potential for loss is also less. There is disagreement between investors whether day trading is actually a profitable means of trading within the stock market or if it is simply a get-rich-scheme, but many investors still choose to actively trade every day.
The main audience for day trading are generally those who have cash to lose, so even relatively large losses are not as devastating. Day trading is not recommended for those new to the stock market and to trading.
Best Online Brokers
The best brokers for day trading offer low trade commissions and fees along with an advanced platform where you can closely monitor your stocks to know when to buy and when to sell. When it comes to commissions as a day trader, you'll be making frequent trades, so a lower cost per trade will make a broker attractive. Brokers such as OptionsHouse and TradeKing have some of the lowest fixed fees, and services such as SogoTrade and TradeStation offer tiered pricing that benefits high-frequency traders, with the price per trade decreasing as you order more trade.
Another consideration is the margin rates as many day traders will open and borrow with a margin account. 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, but most brokers do not regularly change these rates. SiebertNet has some of the lowest margin rates, though many of their other fees are higher than other services.
Discount Brokers: Choose the Right Platform for You
When choosing the right platform, you will want to choose one that offers powerful trading and monitoring features and tools. Most online services have simplistic platforms that are less customizable than desktop software, but those online platforms are generally more intuitive. Desktop platforms offer more customizable and advanced charts, reports and graphs when compared to the typical online service. The right platform depends on your preference and the amount of information you feel you want to monitor and manage.
All services we reviewed offer customizable watch lists and options chains, but some platforms offer advanced monitoring tools. TD Ameritrade's thinkorswim platform is fully customizable, including charts and screeners with markers and trend analysis. Other useful tools most software includes are profit-versus-loss calculators and options probability calculators. 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.
How We Evaluated Day Trading Software
In evaluating day trading software, we considered the features mentioned above among other features the platform offers. We looked at if a software is customizable so you have control over what windows you can view and what information those windows contain. We considered reports and analytics available for predicting and speculating on stocks, including estimation of profit and loss for a particular stock.
We then explored each platform to get a feel for its intuitiveness and the ease with which we could customize the platform, order trades, and run reports and analytics. We also considered the mobile options for each service. While all services offer a mobile option, some provide more features and functionality. E-Trade's mobile app not only allows you to trade stocks and options, but also offers barcode scanning to gain information about publicly traded stocks when you scan a product.
We also considered what investment vehicles are offered by each service. All services we reviewed offer stocks and options, and most offer bonds and mutual funds. Some services, such as Scottrade and Fidelity, offer trades in international stocks, and some services, including optionsXpress, provide opportunities for higher-risk investments, like futures and Forex.
Our Verdict & Recommendation
For day trading, the commission and fees may be your deciding factor, as you will certainly be trading at least once a day. If this is the case, you will want a service with low fixed fees like OptionsHouse or even with a tiered pricing model with fees that decrease as the number of trades you order increase, such as what TradeStation offers. You should also consider margin rates if you will be borrowing on the margin with your broker. Most rates are competitive, but each company has its own tiers for rates depending on the balance in your account.
All services on our day trading broker comparison offers standard monitoring features, including watch lists and option chains, but desktop platforms like TD Ameritrade's thinkorswim offer more customization, including having numerous windows open to monitor the activity of multiple stocks at once. Those platforms may be preferable, but our top services including optionsXpress offer powerful online platforms, most of which are customizable to a degree. Most services offer a trial or even virtual trading within their platforms, so you can test drive a platform before you fully commit to it to ensure it includes the features and functionality you are looking for to best fit your day trading strategies and to choose the best day trading platform for you.