What You Need To Day Trade Stocks – start day trading

By Cory Mitchell, CMT

When you start trading there are a few things that you will need in today’s marketplace. The basics are a high-speed internet connection, real-time quotes, a charting service, and a broker service or platform to execute your trades (electronically). You may also want subscribe to a service which will show you the depth of the market. Market depth shows at what prices other traders are bidding or offering outside of the current price and also shows the volume they are willing to trade. Market depth is a generic term, but is also commonly referred to as Level II quotes.

What You Need To Day Trade Stocks

Depending on the style of trading you are doing will determine the quality of real-time quotes you require. Most charting services now also offer quotes in addition to charts. The more actively, or more often you trade, the more reliable you will want your quote stream. Some companies experience frequently “lagging” quotes, meaning the prices seen by you is no longer the price available in the market. This can cause problems for traders as they will not know the price at which their market orders are being executed.

Since technical analysis is the main tool of short-term traders it is also important to have charts that provide all the tools for the trader’s system to be implemented effectively and easily. Each charting services offers different technical tools and indicators. If you have already developed a trading system it is important to select a charting service that provides everything you will need to implement that system. All the analytical, research, screening and technical tools a service offers can generally be found on the company’s website before you purchase or trial the product. Most charting services offer a free trial period in which you will be able to see how the charts and indicators perform in real-time before committing to subscribe to the service. During this time you will able to see how adaptable the software is to your trading style and plan.

As information has become more easy to come by, certain free services have come up with offer realtime charts.  One of these is http://www.freestockcharts.com.  You can get real-time charts which are quite accurate in liquid securities.  In illiquid securities the charts are less accurate as the information grabbed by the charts is only from one ECN, therefore, if a trade takes place on another ECN (and there are several) it will not update immediately.  This is a good back-up data-feed, but may or not meet the needs of active traders.

If you do not have a trading plan or system and do not have time to come up with one, there are many services available which provide entry and exit signals for trades. These signals are sent to you for a fee via email or are posted on in the subscribers area of the site you are ordering the signals from. If you are going to pay for a service make sure they have a long history of profitable trading signals under real market conditions (not just back tested and optimized data). It is also important to note that if they do have a profitable record you need to follow the exact criteria the company dictates for entering and exiting your trades. If you don’t follow the signals, or deviate from the system under which those signals are generated, you will not see the returns that are advertised.

There are many broker services and platforms for online trading, each with their own benefits. Many of these platforms will provide you with charting, real-time market depth quotes, news and possibly even trading signals. For day trading, or any trading method that requires active trading, it is important to keep the per transaction costs as low as possible.

Choosing a broker is a broad topic, but remember to keep what you are paying for your orders in the context of how much you are making (or reasonable expect to make based on your trading plan). Price out if it is better to attain an online broker with no frills and cheap fees and then receive the tools needed from other vendors, or if paying a higher price for a broker that combines everything you need is worth it.

High speed internet is a must, and the more reliable connection the better.  Technical issues occur, whether it be with a broker or an internet service provider.  Yet, these issues should be minimized as much as reasonably possible.  A sketchy internet connection will lead to big problems when losing positions are mounting, or if orders cannot make it to the exchange because the connection is down.

Conclusion

In summary, it is fairly easy to acquire the tools you need to trade, but a bit of research is required. Make sure you are attaining services and tools that match up well with your trading style. There is no need to pay for excessive services if you have your own trading methods (these days there is so much free information available), and if you don’t have your own methods find a signal provider you like and stick with them.