If you are a day trader, then you know that your trading platform could be the difference between being profitable and losing. Due to the number of trades that a day trader can execute in a day, the importance of having an efficient trading platform cannot be underscored. However, finding a trading platform that would meet your needs requires sifting through commission charges, user-interface, the time it takes to execute an order, ease of deposits and withdrawals, among other factors. Below, we have selected the best trading platforms that would suit your day trading needs.
What is a trading platform?
A trading platform is a computer software program that allows investors and traders to execute transactions within the financial markets. This program enables individuals to place orders for different financial products such as stocks or options through a financial intermediary known as the stockbroker.
Though trading platforms may seem like a new development, their use dates back to the 1970s, when certain stock exchanges offered brokers the ability to place orders electronically through a private network. Unlike today, these orders were not executed immediately but were confirmed later.
In the 1990s, more brokerages used electronic trading platforms, but it was not until the 2000s that they became widespread. Trading platforms have made it possible for traders to conduct transactions remotely and from anywhere in the world. The advent of trading platforms is behind the exponential increase in retail investing in the US stock market.
3 Ways you can benefit from a day trading platform
They include the following:
- Speed in executing trades: Day trading platforms allow traders to execute trades within shorter time frames, which optimizes portfolio returns. The days of reaching your broker through the phones to execute orders are gone.
- Ability to trade from any location: Day trading platforms allow traders to monitor and execute trades from any location globally, provided there is internet access in the region.
- Greater control over transactions: Traders have greater control over their transactions when they use day trading platforms. Trades can be conducted at any time across different markets using a plethora of digital devices, such as mobile phones or laptops. This allows for more flexibility and freedom to trade on the go.
Our picks for the best day trading platforms
There are quite a number of trading platforms that can be used for day trading depending on your needs. These trading platforms range from very simple to complex and often include historical charts, quarterly reports, technical and pricing tools. However, there are certain things traders should look out for when shopping for a day trading platform. We have compiled a list of the best day trading platforms based on specific criteria such as fees, speed of execution, the security of data, customer service, and user-friendly interface.
How do day trading platforms work?
Although day trading platforms project the notion of seamless execution of trades in real-time, a cursory look at the mechanics reveals the contrary. When a trader places a trade (buy or sell) on a trading platform, it is not settled immediately. Settlement in this sense means that the trade has been completed. Instead, the customer is given an equivalent of his share worth represented as units and numbers on his screen. The physical stock, however, has not been obtained but is still being processed. The trading platform directs the order to a clearinghouse in charge of settling transactions in securities. This takes two business days before the trade is appropriately settled. This is why specific platforms have goodwill violations, which prevents traders from executing trades until after a previous trade has been settled. This two-day window allows for the clearinghouse to settle the trade if there is no dispute.
3 Steps to using a day trading platform?
Choose your preferred day trading platform
Choosing the best day trading platform is not easy. You need to consider a number of factors, such as cost, security, speed, and user-interface. Identify your trading needs and choose a day trading platform that addresses those needs.
Open a trading account
When you get a trading platform that addresses your needs, you can then open a trading account with the platform. If you are skeptical about the features, you can demo trade on the platform to feel the software. Also, read the terms and conditions before fully signing up.
After you have opened a trading account, you can start trading. Have an idea of the minimum balance your trading account can hold and if you qualify for any freebies, such as free shares upon sign-up. If you are interested in margins, find out the minimum amount for margins and what interests are.
What are the advantages of using a day trading platform?
Some of the benefits of using a day trading platforms include:
- Superior technical analysis tools
- No overnight risks
- More control and flexibility in trading
- Multiple brokerage options
- Access to online research tools
- The capacity to place different order types
- The ability to monitor investments in real time from remote locations
What are the disadvantages of using a day trading platform?
The disadvantages include the following:
- That ability to execute trades with the push of a button can lead to overtrading.
- Executing trades on your own without professional guidance means you have to make a separate arrangement for research.
- Trading can be addictive.
- A slow internet connection can ruin everything.
Expert tip on selecting day trading platform
Day trading is only profitable when traders take it seriously and do their research. When choosing a day trading platform, look for the platform that appeals to you in terms of ease of payment, commissions, and technical features on the app. Look for day trading platforms that offer extra educational features that can improve your understanding of stocks and the market in general. Go for platforms that would make you better traders.
How to choose the best day trading platform?
Identifying the best day trading platform depends on many factors, but the most important one is to choose a platform that meets your unique trading needs and goals. So, the first thing is to evaluate your investing journey and determine what you intend to achieve so as to know what your trading needs are.
The next thing is to the necessary features every duly registered trading platform should have. Find out the body that regulates it, whether investors’ funds are insured, and if it has adequate account protection features. Finally, you compare fees and commissions. High fees will eat into your trading profits.
In all, these are the vital questions to ask before choosing the best day trading platform:
Is the trading platform regulated?
Whatever trading platform you choose has to be a member of the Financial Industry Regulatory Authority (FINRA) and regulated by the Security and Exchange Commission, which are the regulatory bodies that regulate brokerage activities in the US. If the platform is not based in the US, be sure it is regulated in the country it operates from.
What fees and charges apply?
Always find out what fees and commissions you would incur as a user. Since, as a day trader, you would be posting a high volume of trades, paying attention to fees and commission is a crucial part of your trading strategy. Of course, those with the lowest commissions and fees should be prioritized.
What payment methods are accepted?
It is advisable to go for a platform that has a plethora of payment options. This gives you flexibility in funding and withdrawing from your account.
What are the available assets to trade?
As much as you can, try to find out what assets are traded on the platform. Some day trading platforms do not allow options trading, while others omit certain ETFs and penny stocks from their stock list. This could reduce your trading options and chances to make money. As such, it is advisable to find out what assets are available for trading.
Is there a demo account?
Every good day trading platform should offer a demo trading account. This would allow you to familiarize yourself with features on the platform before plunging into proper trading.
What is the account minimum?
The minimum balance for trading platforms vary. As such, it is best to familiarize yourself with the minimum deposits. This is especially useful if you want to trade options that require a minimum margin requirement.
What educational resources are available?
Some trading platforms provide educational resources for users. This helps to develop the trader’s understanding and provides deep insights. This could be a feature that distinguishes one trading platform from another.
Is there help and support available?
Issues are bound to crop up when day trading. An order may not be executed on time, or there are delays in depositing funds. As such, you need a day trading platform with reliable customer service that can resolve issues quickly. This would improve trust on the part of the customer.
Is there a mobile platform or app?
A good day trading platform should have or both of these. This eases accessibility and gives traders options.
Frequently Asked Questions
Robinhood started the commission-free trading revolution, but TD Ameritrade, Interactive Brokers, E*TRADE, and others have also started offering commission-free stock trading.
Robinhood is good for beginners.
They include charts, technical indicators, historical price, trade volumes, and research.
Trading accounts can be opened immediately provided you have all the necessary details.
Day trading platforms make money through various means, such as interest on deposits, commissions on rebates, or make customers pay for premium accounts to gain access to exclusive investment options.