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Best Online Trading Platforms For Day Traders

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Active day traders are always looking for a way to beat the market and have a list of requirements about what they want in a brokerage. Some of these attributes are low cost, innovative strategy tools, comprehensive trading platform, and premium research. In this article, you can find our preferred online brokers and choose based on your individual needs.

Note: while some brokerages have a lower minimum account requirement, the SEC has determined that pattern day traders are not allowed to trade on margin until they have $25,000 in equity in their trading account. Be sure to verify the SEC’s definition for pattern day traders before applying for margin.

Business24-7’s Best Online Trading Platforms for Day Traders

  • Best overall trading platform – TD Ameritrade
  • Best Options trading platform – Ally Invest
  • Best Low Margin rates, best overall – Interactive Brokers
  • Best options trading – TradeStation
  • Best trading platform – Schwab Brokerage
  • Lowest margin rates – eOption
  • Best for Options Trading – IQ Option
  • Best for CFD Trading – Plus500

Frequently Asked Questions?

Learning to day trade

To start things off, check out our “how-to trade” guide where you will learn a lot about the basics of day trading. However, day trading is more an art than a science. To become a good day trader, you will need to practice a lot.

One excellent way to get that kind of practice is with a demo account. Demo accounts, sometimes called stock market simulators, allow you to participate in the stock market without using “real” money. All of the processes, percentages, and procedures are based on real-life data. The difference is that you use fake money, kind of like in the game of Life, and you can use these accounts to become familiar with the trading platform, how it works, and test a variety of strategies that can be used in day trading.

Risks of Trading?

The obvious reality is that any form of trading has a high risk of losing money. As stocks can change dramatically in price within a matter of seconds, there is a significant potential of losing a lot of money and a very short amount of time. This can be accentuated in day trading as the ups and downs of the stock market are not averaged over time.

While there are many professional day traders in the world, only a small percentage, roughly 1% of the total, consistently earn money. The majority of day traders do not make consistent profit because successful day trading requires constant vigilance regarding the news, the market, stock reports, press releases, and government statements from every company and every country in the entire world. Day trading is rarely profitable for the casual investor.

Unless you’re planning on making day trading your full-time job, it’s generally wise to limit your potential losses by allocating only a small part of your total portfolio to day trading. Since you will probably lose money, especially at the beginning, it suggested that you allocate no more than 10% of your portfolio to day trading. Low-cost index funds and other diversified investments are where the rest of your investments should be over the long-term.

Is day trading legal?

Day trading is legal, but it is also risky. Because of the risk, the Securities and Exchange Commission has determined specific rules that identify who they call “pattern day traders.”

Day trading, as defined by the SEC, is the “buying and selling the same security on the same day.” In addition to this, the SEC indicates that a pattern day trader is someone who makes “four or more trades within five business days” and whose “day-trading activities exceed six percent of the customer’s total trading activity for the five-day period.”

If your trading activity falls into that definition, the SEC requires that you maintain a minimum of $25,000 in equity in your account.

It’s also important to remember that if a broker identifies you as a pattern day trader because of your trading activity, your account will probably be labeled for pattern day trading from then on. This continues even if you stop the behavior that initially caused you to be labeled as a pattern day trader. If you cease from day trading, it’s essential to contact your brokerage and tell them that you are no longer day trading and they probably will remove the equity requirement from your account.

How much money is required to be successful trader?

Short answer: as much or as little as you want, with exceptions.

This question does not have an easy answer and depends on the amount of trading that you will do. The casual day trader can invest as little or as much as they want. There are no legal requirements or policy guidelines.

However, it’s always important to set a limit on how much money you plan to day trade. As a general rule, a maximum of 10% of your total investment assets may be used toward day trading. This protects you from unnecessary risk due to market volatility over the short-term.

In contrast, the Securities and Exchange Commission has outlined rules related to high-volume day traders. These high-volume day traders, called patterned day traders, are required to maintain at least $25,000 in equity account to be allowed to continue participating in their pattern day trading activities.

Trading on margin

Most successful traders trade “on margin.” However, how is margin defined, and what does it mean? Margin is used to describe a specific type of loan or line of credit from a brokerage. In the process of opening an account at a brokerage, one of the questions is whether or not you want a cash account or a margin account.

Margin accounts allow for placing trades using money that has been borrowed. Margin, also called leverage, allows you to make larger trades through the use of a line of credit. Since your trades are larger in size, your gains are also magnified, as well as your losses if those occur. Trading on margin can be risky but, to the disciplined investor, margin is an excellent tool for maximizing profit.

What are the minimum requirements for an online trading platform?

There are three main features that a trading platform must offer to be useful for day traders.

Research and strategy tools. All forms of trading require many data, and the traitors are no exception. The most up-to-date market data is presented and easily understandable tables, charts, and graphs so that you can easily identify potential trade opportunities and price trends.

Speed. You should only use online trading platforms that are reliable and have rapid order execution. This feature is so crucial that many platforms publish their execution speeds as a critical component of their features list.

Low commissions. Day traders make many trades. You have to pay a fee when you buy or sell in your market. That means the more you trade, the more you pay in fees, which decreases your total profit. If possible, apply for volume pricing, which offers a discount fee for traders who make a large number of trades. This is perfect for day traders.

While not technically a requirement, finding a broker that offers a demo account can be beneficial because you can use it to test out new trading strategies using real-world data without risking real money.

What stocks are suitable for day trading?

This is the question that every day trader is trying to answer. While there is no clear and obvious answer, there are three general pieces of advice that will be helpful in choosing good stocks for day trading.

Stocks that are you are familiar with. When you are familiar with the price of a particular stock, its history, how it reacts to the news, earnings reports, and economic shifts, you can make more accurate judgments about the direction that the price will move at any given point in time. The majority of day traders only trade a limited number of stocks. By doing this, they develop a certain expertise in those specific companies and increase their likelihood of accurate predictions.

Newsworthy. One variable that causes the stock price to change dramatically in a short time is the news. A single news announcement can cause the price of a stock to increase by as much as 10% in a matter of minutes. Being aware of these news announcements increase your likelihood of being able to capitalize on those changes.

Volatility. Day traders benefit when the price of a stock changes in a short time. The more often these price changes occur, the higher the probability and the more chances you have to make a profit.

 

Methodology

The ratings for each broker and each advisor are weighted averages of several different categories, including customer support, account minimum, investment selection, account fees, trading costs, and many others. Other variables, such as branch access, advisory fees, customer service, mobile features, and user-facing technology, were considered in our evaluation. Ratings range from a half star (poor) to five stars (excellent).