Finding the best day trading platform is a top priority for active traders looking to try their hand at beating the market. They also most likely already have a good sense of what they want in a broker: a comprehensive trading platform, innovative strategy tools, premium research, and low costs. Below are seven of the best day trading platforms for investors to use.
Best day trading platforms:
- Interactive Brokers
- TD Ameritrade
What is Day Trading
Day trading is the buying and selling of a security within one trading day. It’s most commonly found in foreign exchange (forex) and stock markets, but it can happen in any marketplace. Day traders are usually well-funded and well-educated, using short-term strategies and high amounts of leverage to capitalize on small movements in the price of highly liquid currencies or stocks.
Day traders need to aware of events resulting in short-term market moves making trading the news a popular day trading technique. Scheduled announcements, including interest rates, corporate earnings, and economic statistics are all subject to market psychology and market expectations. When these expectations aren’t met or are exceeded, the market reacts, typically with quick and significant moves often benefiting day traders. Other strategies used by day traders include:
- Scalping – Attempting to make many small profits on minimum price changes happening throughout the day
- Range Trading – Basing buy and sell decisions primarily on resistance and support levels
- News-Based Trading – Generally takes advantage of trading opportunities coming about from increased volatility due to news events
- High-Frequency Trading (HFT) – Strategies that utilize complicated algorithms to maximize short-term or small market inefficiencies
Finding the Best Day Trading Platform
Day traders need to determine their own needs and investing style to decide on the best day trading platform to use. Answering questions such as which financial instruments they will be using, how much money they are willing to spend, what hours they will be trading, and how often they are willing to trade is often helpful in this process.
There are several factors to consider when choosing between the various available day trading brokers. Features created to appeal to long-term investors aren’t necessary for day traders who usually start their trading day with no positions, make numerous transactions, and close all trades by the end of their day.
Day traders often manually place their trades, usually from a chart or via an automated system set to generate orders on their behalf. While fundamental data isn’t a concern, the ability to monitor breaking news, trading volume, liquidity, and price volatility is essential to day trading success. Most day traders prefer brokerages that charge per share instead of per trade. They also need buying power updates and real-time margin.
Fidelity Investments has a solid grip on primary day-trading features, including research, trading platform, and reasonable commissions. Active Trader Pro, its flagship platform, provides a customizable look while its backtesting tool, Wealth-Lab Pro, allows traders to test strategies against 20 years of historical data. Its available research is considered some of the best in the industry with reports from Ned Davis, Thomson Reuters, and others. Fidelity prides itself on not nickel-and-diming its customers with various account fees, and traders pay no commission on ETF and stock trades.
2. Interactive Brokers
Geared towards extremely active traders, Interactive Brokers is a longtime leader in low-cost trading. Trader Workstation (TWS), its quick downloadable platform, has dozens of professional-level trading algorithms, including Adaptive Algo, which helps users find more attractive prices for filling orders. Traders can customize algorithms to fill their market order at the bid and ask midpoint, allowing them to gain a fraction of a penny more within the spread and increase their profits.
Traders will have a hard time finding lower margin rates than what Interactive Brokers offer, especially for those using $100,000 or more of margin. The company also just launched the IBKR Lite platform, which restricts users to IB’s mobile apps and the web-based Client Portal, but doesn’t require users to pay commissions on U.S.-based equities.
TradeStation is a downloadable trading platform that offers various features ideal for frequent traders. Originally a charting and technical analysis package, in 2001, it evolved into a brokerage. Traders can route orders themselves using TradeStation’s smart order routing engine or choosing a trading venue.
A strength of TradeStation is its ability to build, backtest, and deploy automated trading strategies based on technical triggers. It streams clean, real-time data, so users’ strategies aren’t sending trades to markets based on information from erroneous feeds. In-house and third-party tools, both free and fee-based, are available in the TradingApp Store and can be added to user platforms. Both the mobile and web-based platforms sync to the desktop platform, and all offer impressive charting capabilities.
TradeStation has also recently added TSgo, a new platform where clients don’t pay commissions on traded U.S.-based equities, including penny stocks and only $0.50 per contract when trading options. All other commissions and margin rates are the same.
4. TD Ameritrade
The much-lauded thinkorswim trading platform is perhaps TD Ameritrade’s strongest suit. In addition to options and stocks, users can trade futures, futures options, and forex with the thinkorswim platform. They also have access to over 400 technical studies along with a variety of other tools, including a trading simulator and charting with no required base commission. In November 2019, Charles Schwab purchased TD Ameritrade with plans to integrate the two companies.
E*Trade is a well-rounded trading platform that provides users with a discounted commission structure for options. However, its range of fundamental research is where it really shines. Its research offerings include E*Trade’s market commentary along with reports from Moody’s, Thomson Reuters, and others. Power E*TRADE is the company’s innovative platform offering intuitive, easy-to-use tools for futures, options, and stocks trading for users passionate about trading and tracking the market.
Lightspeed is a downloadable platform for day traders. It has proven to be exceptionally stable with no issues during the various trading surges of recent years. Users can customize the platform, which includes streaming real-time quotes for all assets available to be traded. Charts display and update quickly, letting traders apply Level II quotes, technical studies, and other impressive features.
A highly secure trading platform, the Lightspeed login process includes a VPN or virtual private network, which is especially important for users with wireless internet connections. For those using the web platform, a soft token is also offered. Users can also create complex order entry defaults that can include hotkeys that can expedite orders. The LivevolX platform is also available for frequent options traders.
Tastyworks is known as a fast, reliable trading platform that focuses on trading and options analysis with a variety of tools for ETF and stock traders. It has an easily customizable dashboard with the browser platform having almost every feature available with the downloaded platform, especially crucial for traders who aren’t always trading from home.
Tastyworks’ tools are created for users who visualize prospective trades instead of following a flow of time and sales data. The tools focus on the probability of a profit, volatility, and liquidity with implied volatility appearing on quote pages before an individual quote to help users understand market opportunities.
Investors need to do their homework when selecting the best day trading platform for them, making sure it caters to their specific requirements. With many day trading platforms offering a free version or trial period, it’s always useful to try-out a potential platform before purchasing or signing up for a long-term subscription. Demo accounts are another way for traders to determine if they like the platform, including sending questions to see how good their customer service department is.
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