What is day trading?

Day trading is a strategy, where securities are purchased and sold within a single trading day. It uses high amounts of leverage and short-term trading strategies to capitalize on small price movements in highly liquid stocks and currencies. In layman’s terms, it means that day traders use high amounts of capital to leverage changes in price within a short period of time to make a profit. They use widely available and frequently traded assets.

Day trading might seem like the perfect opportunity to make a quick buck – but the truth could not be further. Day trading is highly risky with smaller rewards. It requires a significant amount of knowledge, time commitment and funding to reap profits.

Successful day traders have 4 key traits:

• Knowledge and experience in the market: dive into the market fundamentals and gain significant practice before you put your head in the game
• Sufficient capital: it is recommended to risk only the amount of cash one can afford to lose. This helps to keep a level head through the process and take out any emotion. A larger amount of capital is also necessary to be able to have significant gain from small intraday movements.
• Strategy: refine a consistent strategy to achieve success over the market. See which trading strategy could fit you below!
• Discipline: any strategy is useless without discipline. Set your own criteria for trading and stick to it.

What do you need to look for in a day trading software?

There are 3 must-haves of day trading software:

• Low commissions: in order to generate significant profit day traders need to complete a lot of trades with smaller gains. If a commission is eating a significant part of the profit, trading becomes less profitable.
• Research and strategy tools: day trading should be based on data. That is why having access to custom charts and analytics is crucial.
• Speed: with the changing market conditions and the short life-span of trades, speed becomes imminent. You can find information about execution speed and how they route orders right on the trading platforms.

Check on Market Rebates

Market exchanges often offer rebates to your broker for adding or taking liquidity back to them, which usually means no more than a tenth of a penny per share. Some trading platforms give this rebate back to you, while others keep it. Before choosing a software check on how they handle market rebates.

Best day trading platforms

From institutions to beginners- see our selection of the best day trading platforms on the market!

Interactive Brokers

Key strengths: low commission and advanced tools made for active trading

Interactive Brokers is perfectly cut out for active and hyperactive traders. It offers wide investment selections, programmable hotkeys, and the lowest commissions in the industry. It might not be the best choice for beginners, as it charges inactivity fees, has high balance requirements and lacks in educational resources. Interactive Brokers is the preferred day trading platform in the institutional community.

Fidelity

Key strengths: competitive rates, sophisticated tools, bespoke day trading software

Fidelity provides competitive rates, with an industry-leading order fills platform. Their Active Trader Pro Desktop software provides a very wide variety of charting tools. There are 22 different drawing tools, 166 optional studies, overlays and more to ensure you can make the most informed trading decisions.

TradeStation

Key strengths: flexible rates, large datasets, large community

TradeStation not only provides flexible rates in 3 different bundles, desktop, and web-based versions but is the most comprehensive set of data. For equities, one can access more than 40 years of historical data, or choose from the 274 indicators and studies. The only drawback could be the minimum balance requirement for active trading and the lack of commission-free ETFs.

TD AmeritradeKey strengths: great service, plenty of tools, no account minimum

TD Ameritrade might charge higher-than-average commissions, but they make up for it with a better-than-average service. They provide an impressive array of tools such as company profiling, advanced earning analysis, or charting social sentiment. Although fees are higher, they compensate with free research, no account minimum, and superb platform quality.

Charles Schwab

Key strengths: user-friendly, great customer support, no inactivity fees

Charles Schwab might be the place for beginners. Their desktop day trading software StreetSmart Edge is easier to learn than any competitor platform. There are no inactivity fees and they have great customer support. However, there might be fewer features and options for customization and higher commissions.

Webull

Key strengths: beginner-friendly, features, free account

Webull, complete with mobile and desktop apps, offers a great selection of features and a day trading simulator for beginners. Investors enjoy free registration, research, and market data. While this is a great platform for traders just starting out, for professionals looking for higher speed and frequency Webull might be a bit on the slower side.

While it is great for traders on the rise, Webull’s slower speed might be an issue once you are ready to start high-speed, high-frequency trading or scalping.

How much do you need to day trade?

Traders must have at least an account balance of $25,000 to be able to day trade.

This amount has been set by the Pattern Day Trader rule to protect investors and grants them access to a 4:1 margin during the day.

According to the SEC, all forms of investment include a certain risk, however, day trading is highly risky. They believe that those whose account value is less than $25,000 might be less sophisticated traders, and subject to even higher risk due to their lack of knowledge or experience.

Choose the stocks for day trading

Now that you have seen the best day trading platforms, one key question remains. What kind of stocks will reap you the best profits?

While it is hard to pinpoint exactly what stock is going to make you rich, here are a few qualities you should look for in stock for day trading.

1. Large trade volumes and highly liquid – highly liquid stocks are easy to buy and sell on the market and are perfect for quick day trades
2. Relatively volatile – you need stocks where the price is subject to changes to be able to leverage the differences
3. Newsworthy– news often swing the value of a stock, so it is worth following what the media talks about and which company is affected
4. Known to you – the thousands of stocks, companies, markets, and earnings make it nearly impossible to understand all the economic shifts. It is recommended to develop a deep understanding of a few specific stocks and focus on trading those.

Know the risks

Risk management is all about limiting the potential downside, or the amount of money you could lose. Ask these questions before you invest:

• If the trade goes wrong, how much will you lose?
• How much will your overall portfolio suffer if this trade goes bad?
• What losses are you willing to endure before you sell?
• To make a profitable trade at what point will you trade?

Even the best day trading strategy cannot guarantee that trade will always be profitable and the market will go your way. Managing your risk will help you to accept small losses, do not let them turn into big ones and save your capital for future trades.

Get familiar with patterns and charts

Traders everywhere rely on analytics and charts to give them insights into market movements. Learn how to read candlestick charts, do technical analysis and learn the industry terms, such as volumes, bears, and bulls.

Choose a cash or margin account

When opening a brokerage account you get to choose between a margin and a cash account. With a cash account, you trade with your own funds. Margin means essentially getting a loan from your broker and creating bigger gains for yourself.

Try a day trading simulator

Practice makes perfect – the old proverb applies to day trading too. Luckily, there are several day trading simulators you can try before you put your funds at stake:

• NinjaTrader

NinjaTrader is a low-cost futures and forex trading platform, which has a free software version to try your skills. It allows you to do trade simulation, advanced charting and strategy backtesting.

• OANDA

OANDA is a forex trading platform with unmatched flexibility. The demo account can be used for free as long as you like, and it is available on desktop, mobile or through an API. It also offers a desktop version, stop-loss mechanisms, and advanced charting capabilities.

• TradingView

TradingView is a well-known platform for stock trading and expert charts. It gives you the option to trade in simulation stocks, forex and futures too. The best part is once you are ready to start trading live you can hook it up to some brokers.

Day trading can be a very profitable form of investing – and with our tips, you get the basics to get started. Don’t forget to study the markets, practice in a simulator and keep the risks in mind once you dive in!