Why Use Day Trading Software?
The top performers in our review are OptionsHouse, the Gold Award winner; Fidelity, the Silver Award winner; and TradeKing, 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 10 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. You can 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 and Forex sites. For more information, check out our Online Stock Trading site and articles on stock trading.
Day trading is high risk and sometimes offers high payoffs, which is what attracts many to it. While you may receive more in returns from investing more, you can also lose more than investing with less money. With day trading, it is recommended that you start small. The payoff might 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 generally comprises 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 day trading 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 TradeStation offer tiered pricing that benefits high-frequency traders, with the price per trade decreasing as you order more trades.
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 services determine their rates. Rates are always subject to change, but most brokers do not regularly change these rates. OptionsHouse has some of the lowest margin rates.
Discount Brokers: Choose the Right Platform for You
When choosing the right platform, you 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 watchlists 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 trading software, we took into consideration the features mentioned above as we tested the ease of use and functionality of each service. To determine usability, we looked at if a software is customizable and to what extent the program allows you to control what information is displayed. We also downloaded each service’s mobile trading app to connect to our online account, perform research and evaluate funding options. We created proprietary scores for each service’s platform and mobile app that reflects our experience.
The Platform Ease of Use score reflects our experience with the online or desktop platform. We created option chains, set up watchlists and alerts, and filled out the trade ticket. We used each program’s analytic tools and charting options to research. We found that OptionsHouse online platform is a good choice. It is simple to navigate and intuitive. TD Ameritrade is also a solid option - its thinkorswim desktop platform offers more options for charting analysis than any other service on our lineup; although, it is a more advanced platform and less intuitive than many of the other online options.
We also considered the mobile options for each service and created a Mobile App Functionality score. We took into account the app’s ability to create and edit watchlists, perform research, and fund accounts. While all of the apps allow you to research and trade stocks, some are not as easy to use as others. We also took into consideration the app’s availability on various smartphones.
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 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. OptionsHouse offers the most competitive rates; however, it is important to remember that each company has its own tiers for rates depending on the balance in your account.
Our Bronze Award winner, TradeKing, has an intuitive online platform with all the standard monitoring features you need to become a successful day trader. While the mobile app does not allow you to fund accounts, its clean interface and usability make this service a good option.
All services on our day trading broker comparison offer standard monitoring features, including watchlists 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 offer powerful online platforms, most of which are customizable to some degree.
Most services offer a trial or even virtual trading within their platforms. This lets you 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 software for you.