In day trading, a good trading software and a fast and stable internet connection is crucial. Quick decision-making and real-time trade execution are key, and a slow or unreliable internet can cause missed opportunities and financial loss. Opt for the fastest broadband possible, ideally a fiber optic connection, for its speed and reliability. Also, think about a backup, like a high-speed mobile hotspot, to always stay connected. Low latency, which means quicker data transmission, is important for trading in real-time.
Computer Hardware: Build Your Trading Station
Your computer, as your primary trading tool, needs to be robust. Choose a modern, multi-core processor to run several programs at once smoothly. For memory, 16GB of RAM is the minimum but get as much as you can as it is better for handling multiple tasks. Solid-state drives (SSDs) are recommended for storage because they quickly access and boot up data; aim for at least 512GB. Multiple monitors are helpful to watch different markets and data together. Finally, have a good backup solution, like an external drive or cloud storage, to keep your data safe and accessible.
Trading Software vs Trading Broker
In day trading, the money is usually held by the trading broker and not by the trading platform. This is because the broker acts as the financial intermediary. When traders deposit funds, they go into an account managed by the broker, which is necessary for executing trades. The broker’s management of these funds is also subject to financial regulations, ensuring that client funds are handled and protected appropriately.
Reputable brokers often use segregated accounts to keep client funds separate from the company’s own finances, providing an additional layer of security. On the other hand, the trading platform, which is essentially a tool for making and executing trading decisions, does not hold or manage client funds. It’s mainly used for analysis, charting, and accessing market research.
There are brokers that have their own proprietary trading platforms. These platforms are designed specifically to work seamlessly with the broker’s own trading environment and services. It may seem like a match made in heaven, but there are downsides to it. Here are some to keep in mind:
- These platforms might not have as many features as others. This means you might not do some advanced trading moves.
- These platforms often push the broker’s own products, so you might not see all the market options.
- If you change brokers, you’ll have to learn a new platform each time. This is different from using one popular platform with many brokers.
- Not as many people use these broker-owned platforms, meaning that there’s less help and fewer tools from other users.
- A broker’s platform might be set up to make more money for the broker, not always what’s best for you.
Best Brokers for Trading, Our Picks
Charles Schwab
Fees: $0 per online equity trade
Account minimum: $0
Promotion: None
Charles Schwab recently acquired TD Ameritrade and with it, the well-regarded thinkorswim platform or trading software. This adds to Schwab’s already-impressive roster of platforms: Schwab.com, Schwab Mobile and StreetSmart Edge. Our tester also found that Schwab excelled at user experience — many trades are available before a transfer has settled into your account, and a “SnapTicket” feature allows you to quickly place trades while you’re navigating research and other features on Schwab’s platform.
Pros
- Commission-free stock, options and ETF trades
- Four trading platforms with no minimums or fees.
- Above-average mobile app.
- Extensive research offerings.
- Large fund selection
Cons
- Low interest rate on uninvested cash
Webull
Fees: $0 per online equity trade
Account minimum: $0
Promotion: None
Webull stands out for its ability to combine a minimalist, easy-to-navigate look and feel with the capabilities of and advanced trading software, meaning it’s an ideal fit for new or intermediate traders. It isn’t intimidating to get started, but Webull’s trading platforms are flexible enough to grow alongside you as your trading skills advance.
Pros
- Commission-free stock, options and ETF trades
- Easy-to-use platform.
- Advanced tools.
- Access to cryptocurrency.
- High interest rate on uninvested cash.
- High order execution quality.
Cons
- No mutual funds.
- Thin educational support.
Interactive Brokers
Fees: $0.005 per share; as low as $0.0005 with volume discounts
Account minimum: $0
Promotion: Exclusive U.S. residents who open a new IBKR Pro account will receive a 0.25% rate reduction on margin loans. Terms apply.
Interactive Brokers offers access to seven different trading platforms, including three apps, two web-based platforms and two desktop platforms. The brokerage is known for its professional-level desktop platform, Trader Workstation. Its newest offering, IBKR Desktop, combines features of that platform with new features driven by client demand.
Pros
- Per-share pricing
- Volume discounts.
- Large investment selection.
- Extensive tools for active traders.
- Powerful trading platform.
- NerdWallet users who sign up for IBKR Pro get a 0.25% discount on the first $100,000 of a margin loan.
Cons
- Complex pricing on some investments.
E*Trade
Fees: $0
Account minimum: $0
Promotion: Get up to $1,000
E*TRADE and Interactive Brokers are the only trading software on this list to score five stars for extended trading hours and market access. E*TRADE offers ETF trading 24 hours a day Monday through Friday, and extended market trading hours from 7am ET to 8pm ET. The broker also offers several strong trading platforms — a mobile app, its website and Power E*TRADE.
Pros
- Commission-free stock, options and ETF trades
- Easy-to-use tools.
- Advanced mobile app.
- Extensive tools for active traders.
Cons
- Website can be difficult to navigate.
- Low interest rate on uninvested cash.
- No fractional shares.
ZacksTrade
Fees: $0.01 per share
Account minimum: $2,500
Promotion: None
ZacksTrade is an introducing broker to Interactive Brokers, which means ZacksTrade customers have access to a rebranded version of Interactive Brokers’ trading software — a good thing for day traders, since Interactive Brokers is known for its powerful, pro-level platforms. ZacksTrade overall comes with higher fees, but stands out when it comes to OTC stock trading.
Pros
- Ample research offerings.
- Robust trading platform.
- Access to international exchanges.
Cons
- Charges commissions for stock, options and ETF trades.
- High account minimum.
- Low interest rate on uninvested cash.
Fidelity
Fees: $0
Account minimum: $0
Promotion: None
Fidelity’s huge arsenal of proprietary investment products, research and trading tools, coupled with its lack of account management fees, make it a superb trading software for beginner and advanced investors alike. Some weak points, such as the portfolio analysis and relatively high fees for managed accounts such as robo advisors, are more than made up for by the breadth of investment choices and resources
Pros
- Top notch research and reports.
- Superb screeners.
- 24/7 customer service from financial professionals.
- Extensive educational offerings, including group coaching.
Cons
- The portfolio analysis tool is too simplistic for deep asset assessment.
- Managed options are unexceptional with high fees.
eToro
Fees: $0
Account minimum: $0
Promotion: None
eToro’s trading software courts socially-leaning investors who want to learn from others and share their own insights. The cryptocurrency features include individual coin investing, Smart Portfolios with a mix of digital assets and the CopyTrader program. Stock and ETF investors enjoy fee-free trading and basic analysis, charts and order types. eToro Club members gain benefits as their assets within the portfolio grow. All customer service queries are handled online through email support tickets.
Pros
- Easy account opening.
- Free demo account and $100,000 virtual cash.
- Commission-free Stock, ETF, and options investing.
- Cryptocurrency Smart Portfolios simplify digital coin selection.
Cons
- Makes a game of investing.
- Encourages copying other investors, which might not be appropriate.
- Limited number of available ETFs.
- Basic charts and investment analysis tools only.
Technical Analysis Fundamentals
Technical analysis is a key part of trading, helping you understand market trends and make decisions. Let’s break down the basics:
- Chart Types
- There are three main types of charts: line, bar, and candlestick. Line charts are simple, showing closing prices over time. Bar charts provide more detail, showing the opening, high, low, and closing prices. Candlestick charts are popular for their clear depiction of price movements, displaying the same information as bar charts but in a more visually intuitive way.
- Technical Indicators
- These are tools that help you analyze market trends. Moving averages smooth out price data to show a trend direction. The Relative Strength Index (RSI) indicates whether a stock is overbought or oversold. The Moving Average Convergence Divergence (MACD) shows the relationship between two moving averages of a stock’s price.
- Chart Patterns
- Recognizing patterns in charts can help predict future market movements. Common patterns include ‘head and shoulders’, signaling a reversal, and ‘triangles’, indicating continuation or reversal.
- Volume Importance
- Volume, the number of shares traded, is vital in technical analysis. High volume often confirms the strength of a trend, while low volume might suggest a lack of interest.
- Time Frames
- Different time frames in chart analysis offer various perspectives. Short-term traders might look at minutes or hours, while long-term investors might focus on days, weeks, or months.
- Trend Analysis Basics
- This involves identifying the direction of market prices. Rising prices, a downtrend by falling prices, and a sideways trend by stable prices mark an uptrend. Understanding these trends helps you make informed trading decisions.
Understanding these fundamentals of technical analysis can significantly enhance your ability to make educated decisions in trading, giving you a clearer picture of market behaviors and trends.
Fundamental Analysis Basics
In essence, fundamental analysis means examining a broad range of factors to understand investment values, helping you make informed decisions by seeing the bigger picture. It involves understanding various factors that can impact the value of stocks and other investments.
A major part of this analysis is monitoring economic indicators like job creation and inflation. These give insights into the economy’s health, which can influence markets. Corporate events, such as a company’s profits, dividend payments, or significant business changes can affect a stock’s price.
Understanding financial news and reports is not just about knowing what’s happening, but also about understanding how these events could impact your investments. This includes everything from a company’s financial health to broader economic and political news. Central banks, like the U.S. Federal Reserve, make decisions on interest rates, which can greatly affect the economy and markets.
Knowing their actions can help you predict economic trends. International economic factors are equally vital. Events in other countries can influence markets worldwide.
Lastly, balancing fundamental analysis with technical analysis, which focuses on price patterns, is key. Using both methods offers a more comprehensive view of potential market movements.
To learn more about Fundamental analysis visit: Investopedia
Summary
Wrapping up our exploration of day trading software and technology, we’ve highlighted how crucial the right equipment and understanding are for success.