Best Day Trading Platform

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Alex Partida

Nov 25th 2022  .  12 min read

Introduction To Day Trading Platforms

There are many decisions to consider when getting started in day trading. 

Critical aspects range from options trading style to risk parameters to fit your goals. After you fully understand what trading style you will adhere to, the next step is finding all of the software to fit your trading needs. This includes trading platforms, trading websites, and brokers. Another thing to be aware of is how to correctly choose the account type you will need to set up to trade your options strategy properly. This article will cover all of this to help get your day trading journey started on the right foot. 

Key Takeaways

  • Do not work for your trading platform; make your trading platform work for you depending on your trading needs.
  • Finding an account style that fits your trading needs is essential to help maximize your ability to trade effectively and efficiently.
  • A margin account allows you to leverage your capital, but a cash account may allow you to avoid being flagged as a pattern day trader. 

What is day trading

Day trading is defined as a trade where the execution of entry and exit on the given position is done on the same business day. There are many different strategies for executing a day trade. Some of the most common strategies are scalping, credit spreads, and iron condors. Day trading is often misunderstood and considered a higher risk than other trading strategies. Although this can be true, day trading requires a skillset to be developed like any other options trading method. Day trading also can be flagged as a pattern day trader, but there are ways to avoid this, which will be discussed under account types below. 

Brokers

Some of the most common trading brokers are Fidelity, Interactive Brokers, Trade Station, TD Ameritrade, E-Trade, and Charles Schwab. It is important to note that you are allowed to have different accounts set up with various brokers to fit what you are looking for to fulfill your financial needs. Some brokers may be easier based on your banking situation and if the strategy you plan to deploy may make sense. However, only some brokers will be the best fit for any given system, so researching individual brokerages with their platforms will be essential to fit your options trading strategy. 

Platforms

One thing to consider when narrowing down your list of platforms to use is the fees associated with the broker. Some platforms have as little as no fee up to a dollar per execution, depending on the trading strategy. Frequently these fees can be negotiated later down the road, but getting situated with a platform you are comfortable with helps paying the fees be more justified. Think or Swim, Tasty Works, Trade Station, and Interactive Brokers (IBKR Pro) are the most common trading platforms. Each platform excels in its way, and you should pick one that best suits your options trading style. 

News sources

There are many ways to get news regarding credible trading news. There are many accounts on Twitter that efficiently post information in real-time. First Squawk is one of the most prominent follows on Twitter to help keep you in the loop in real-time. Outside of First Squawk, Walter Bloomberg is another staple in the trading community when it comes to getting trading news promptly and accurately. Twitter offers a financial side of the platform known as “FinTwit,” with plenty of credible sources to keep up with all things trading. Market Watch is another website where traders can get upcoming events on. 

Websites

Some websites every trader needs to have bookmarked on their computer are Market Watch and TweetDeck. Market Watch is where you can keep track of all upcoming economic events and the calendar for all events that may alter the market. As a day trader, it is crucial to understand what could shake the day up ahead of time. The more experience you have as a trader you will also be able to understand how price action moves on certain days based on looming events, giving you an additional edge. TweetDeck is another website you can use to keep up with your trading news. TweetDeck is the recommended way to receive information from Twitter. This website allows you to customize the layout and the way you get notified. You can set it so that you only get notifications from the news sources you want in real-time, allowing you to digest the news as quickly as possible. 

Margin Accounts

A margin account is an account type that allows you to leverage your buying power. This account type is required for certain types of options trading strategies. In a margin account, you will need more than $25,000 when the trading session starts to avoid being flagged as a pattern day trader. A pattern day trader is defined as someone who executes the entry and exit in the same trading session more than three times in 5 days. Someone would still use a margin account because their trading style requires more capital than what is held in their liquid value. Margin allows you to leverage your buying power to execute strategies such as credit spreads, debit spreads, and iron condors. These strategies can be used for day trading, but depending on your account size, a cash account may be the better option for day trading if you want to scalp. 

Cash Accounts

A cash account is an account type that allows you to bypass the pattern day trading rule. A cash account can avoid the pattern day trading rule because you are using your capital rather than leverage. In a cash account, the funds you use on any trade will be locked until the following day when the case settles. This also applies to the profits made on a given day. For example, if your account is at $10,000 and you place a trade in your account with a total risk of $2,000. In this example, let’s say you make 20% profit on the trade and exit the trade with a $400 profit. This means that the $400 profit and the capital used to place will not be available to use again until the funds settle – typically in the next trading session. After this trade has been taken, you will be left with $8,000 available to trade with. The downside of a cash account is that you may not be able to afford to place trades such as credit spreads, debit spreads, and iron condors because of the high capital requirements to place trades of that nature. If you are looking to mainly scalp, then a cash account may be the best option for your day trading options account. 

Charting on platforms

Charting is an essential aspect of day trading. Some platforms will have better-charting software than others. Depending on your trading style will determine how advanced your charting software will need to be. For example, scalping often requires you to perform technical analysis in a smaller time frame, so having a capable charting platform is essential. Think or Swim through TD Ameritrade is often referred to as the best charting platform available. Things to consider when choosing a platform to chart on are the studies that the platform provides, capabilities to perform technical analysis, and overall aesthetics. Depending on the style you like to view your charts, allowing a chart to be easily readable is an important aspect of digesting information quickly and efficiently. For example, if you are color blind, finding a charting platform that allows you to customize your color settings will be required when choosing a platform to chart. 

Best days for day trading

This will entirely depend on your trading style. For example, if you like to scalp, you can use a tradable index that offers many short-dated options expirations to capitalize on short-term volatility. If you want options to move faster and be a higher risk, higher reward trade, you should look for options with expiration dates close to the day you are trading. Outside of a tradable index such as the S&P 500 index (SPX), SPDR S&P 500 ETF Trust (SPY), and Invesco QQQ Trust ETF (QQQ), expiration dates will be every Friday if the name you are looking to trade offers weeklies. If you like higher risk, higher reward trading, then Thursday and Friday will be the best days to trade for that risk tolerance. If you are looking for a slower-moving, less risky, and less volatile contract, you will want to trade an option with an expiration date a little further out. If you are looking to trade on a Thursday or Friday, trading the option for the following week may be helpful. Other than that, trading on Monday and Tuesday Is the best option to minimize the volatility that a super short expiration date allows. Typically, when it comes to trading strategies such as a credit spread, you are also looking for short-dated options expiring as the theta will help you. The shorter the expiration date, the faster theta will decay premium, which will increase the probability of profitability in your trade.

Are you Ready to Start Trading?

Trading mistakes will happen; there’s no getting around that. That’s why it’s so important to have guidance and mentorship while you trade. Here at Simpler Trading, we can offer that in the Simpler Free Trading Room. Sign up today and gain access to our live free room, recorded sessions, and free classes. Why trade alone when you can trade with us?

Mobile vs. PC

Both Mobile and PC platform compatibility is vital when it comes to choosing your trading platform. It is not recommended to execute trades solely off of mobile, but there are times and places where having the ability to do so is crucial. Having the ability to comfortably check on charts, positions, and your portfolio on the go should be considered when choosing a platform, even if 99% of your trading will come from the computer. That said, a computer is a way to go when it comes to taking trading seriously. Investing in a proper computer that can efficiently run your platform will be a requirement. When considering a platform, you should consider what computer software will be required to run it effectively. If your computer is not compatible with the software, you are doing the platform an injustice and may need to consider an alternative platform. 

The fastest platform for day trading

Interactive Broker is a platform that is well known for the speed of its execution. If you are looking into brokers purely for execution, Interactive Brokers stand out amongst the rest. Another platform may be considered if you are looking for a platform with charting abilities. When referring to speed, you can also look at all aspects of the platform. For example, Think or Swim is known for its fast and efficient charting abilities that allow traders to quickly analyze a chart through their built-in charting software. Speed is vital for many trading strategies, such as scalping. Speed, however, can be less critical if your strategy is buying equity, for example. 

Conclusion 

You need to make sure that your trading platform works for you. This means that your platform allows you to trade without having complications with charting, execution, and speed. When you choose a trading style, you will be able to narrow down your choices of platforms as each options strategy has a different emphasis on what is needed to be successful. Lastly, once you understand your trading strategy and account size, you can choose the account type that best benefits you as a trader. 

FAQS

What platform is best to day trade on?

This is going to be all preferences on how you prioritize different features that various platforms offer. Think or Swim, Interactive Brokers, and Tasty Works are the most popular platforms. Each platform has its strong points, but it should ultimately compliment your trading rather than complicate it. Charting, execution, and customer service should all be considered when choosing a broker. It is also important to remember that you can use multiple platforms to maximize each platform’s strong points. 

Why do you need 25k to day trade?

The short answer is that you don’t. There is a common misconception in the trading community that you need $25,000 in an account to avoid being flagged as a pattern day trader. You can avoid being flagged as a pattern day trader altogether by switching to a cash account rather than a margin. The downside is that you may not be able to trade specific day trading strategies that require margin to execute. Ultimately, it depends on your trading style for which account you need to trade. 

What trading platform is most profitable?

There is no platform that will directly correlate with your profitability. You will need to look for a platform that aligns with your trading style the best. This can range from execution to charting software that comes with the platform. Finding a good balance of charting and execution can be a critical part of your trading. It is also okay to utilize multiple platforms to have the perfect blend of execution and charts. 

Why is day trading so hard?

The real reason for the high failure rate is the barrier to entry is so low, in addition to the skill required to trade successfully. Think of a challenging career such as law or medicine; there is a lengthy vetting process even to become that through school. The reality is that any profession with a high level of skill required will have a high failure rate. At the end of the day, remember that anything worth having will be challenging.