https://www.forbes.com/advisor/investing/best-online-brokers-for-day-trading/
Professional traders are a demanding bunch. That’s because the margin between success and failure in markets can be paper thin—using the right trading platform can make all the difference.
Day traders earn their living by entering and closing out multiple trades in a day in pursuit of profits. This strategy requires fast and reliable trade execution, the lowest possible commissions and access to customer service when things go awry.
Forbes Advisor evaluated a broad selection of platforms in order to help you choose the best online brokers for day trading. Our side-by-side tests placed the greatest importance on low commissions and fees, best-in-class platform and technology and highly responsive customer service to find the best trading platforms available.
Why you can trust Forbes Advisor
Best Online Brokers for Day Trading of January 2024
BEST ONLINE BROKER FOR DAY TRADING
Interactive Brokers
Tiered trading commissions
$0.0005 to $0.0035
per share
Account minimum
$25,000
BEST DAY TRADING PLATFORM FOR EDUCATION
TradeStation
Tiered trading commissions
$0
Account minimum
$25,001
BEST ONLINE BROKER FOR TRADE EXECUTION
Lightspeed Trading
Tiered trading commissions
$0.0010 to $0.0045
per share
Account minimum
$25,000
BEST DAY TRADING PLATFORM FOR CUSTOMER SERVICE
Cobra
Tiered trading commissions
$0.0015 to $0.002
per share
Account minimum
$30,000 to open, $25,000 ongoing
BEST DAY TRADING PLATFORM FOR STRATEGY
TradeStation
Tiered trading commissions
$0
Account minimum
$25,001
BEST DAY TRADING PLATFORM FOR SHORT SELLING
Cobra
Tiered trading commissions
$0.0015 to $0.002
per share
Account minimum
$30,000 to open, $25,000 ongoing
Forbes Advisor exhaustively tested 21 of the leading US online brokerage services in our search for the best day trading platform. We conducted a hands-on, six-month survey that compared hundreds of variables across six major categories: commissions and fees, platform and technology, range of product offerings, research and education, account security and customer service.
We opened live accounts and performed in-depth assessments of the broker platforms and their services. Testing was led by a seasoned trading industry professional.
In choosing the best brokers for day trading, we placed the greatest emphasis on the categories of commissions and fees, platform and technology and customer service. We carefully compared the commission rates, platform fees and account-related costs on the leading platforms.
When testing brokerages, we looked for tools specifically helpful to day traders, like advanced charting and order types, and rapid trade execution. In our customer service tests, we measured the time it took to get a response over the phone, by live chat and by email. We also took into account how well informed and helpful the representatives were and whether they held relevant financial licenses.
To learn more about our rating and review methodology and editorial process, check out our guide on how Forbes Advisor rates investing products.
What Is Day Trading?
Day trading is a strategy employed by professional traders to profit from short-term price movements in stocks and other securities. The name of the strategy is key: Day traders enter positions with the intention of getting out on the same day.
The goal of day trading is to take advantage of volatility and liquidity in the market, since prices can fluctuate significantly throughout a single trading session. Day traders depend on advanced techniques—technical analysis, chart patterns and market indicators—to identify entry and exit points for their trades.
Day trading requires intense active monitoring of the stock market and quick decision-making. Traders often use leverage—commonly called margin trading, or more plainly, borrowed money—which lets them enter larger positions with a smaller amount of their own money. This amps up the risks associated with day trading, as losses can accumulate rapidly if trades go the wrong way.
It’s important to note that day trading involves substantial risk. Day traders expect to see losses, and their goal is always to ensure that their wins exceed those losses.
How to Day Trade
Day trading requires a solid understanding of the market, risk management strategies and a disciplined trading plan. Research and planning are absolutely essential for successful day traders. It only works if traders pay close attention to these factors:
- Trading strategy. Day traders focus intently on building their own personal trading strategies with focused criteria for entering and exiting trades, risk management and profit targets. Strategy is essential to help maintain discipline and consistent decision-making.
- Market monitoring. Day traders actively monitor the market, watching price movements, trading volumes, market news and a host of other factors that could impact their target securities. They depend on real-time data to track the market.
- Evaluate opportunities. The product market monitoring and a solid strategy is the ability of a day trader to evaluate opportunities that align with their criteria. Typically this involves identifying technical factors like support and resistance levels, chart patterns and trend reversals that suggest future price movements.
- Trading execution. Once an opportunity arises, traders need to decisively enter trades to capitalize on short-term price movements. They use different order types—like market orders and limit orders—to get the right prices.
- Risk management. Day trading is very risky, making risk management an essential skill. This includes setting stop-loss orders, which automatically exit a trade if the price moves against them beyond a certain threshold, limiting potential losses. They also use position sizing to determine the appropriate amount of capital for each trade.
- Closing positions. Day traders want to close out all their positions before the end of the trading day to avoid overnight risks. This ensures that they are not exposed to potential market gaps or news events that may occur when they are not actively monitoring the market.
How To Choose an Online Broker for Day Trading
The key factors necessary to succeed in day trading are fast, reliable execution of trades and the lowest possible trading commissions. A day trader can have a majority of winning trades, yet still lose money at the end of the day if their commissions outweigh their profits. Since day traders are continually buying and selling assets, they may rack up substantial costs in the form of trading commissions.
Similarly, optimal execution of orders is essential. Getting in and out of the market and taking small profits continually throughout the day requires efficient order execution. During fast-moving market conditions, such as at the market open or just after an important piece of news has been released, it’s especially important to be working with a broker that can provide reliable order execution.
As for commissions, our report lists the ones that brokers post for stocks, mutual funds and ETFs. When we contacted broker salespeople, several were willing to offer discounts. Higher prices commonly apply to options. Additional charges can apply.
Finally, if there is a technical outage or any other trading difficulty, traders must be able to reach customer service fast to make sure that they can get out of the market and manage their risk exposure. Brokers with the best customer service will have both phone and chat support available without little to no wait times.
Direct Access Brokers vs. Brokers Selling Order Flow
Since fast trade execution is essential for day trading, professionals prefer online brokers that offer direct access to markets. Direct access brokers allow traders to directly route their orders to specific exchanges, electronic communication networks (ECNs), market makers and dark pools. The freedom to choose how orders are routed can provide access to more liquidity and faster execution.
But direct access to markets costs money, and that’s why direct access brokerage platforms charge commissions—unlike many of the more well-known online brokerages.
When stock, bond and ETF commissions are zero, that suggests that an online brokerage is being paid third-party commissions to route order flow to specific middlemen. This typically results in slower trade execution, but it allows for those attractive $0 commissions.
The Risks and Rewards of Day Trading
While it’s notoriously difficult, day trading can yield large rewards for the minority that manage to succeed over time. Increasingly efficient markets and the rise of algorithmic and high-frequency trading have made day trading harder for individuals.
Studies indicate that algorithmic trading has recently accounted as much as 60% to 73% of all equities trading in the United States. To a greater extent, individual ‘point and click’ traders are now competing against formidable machines.
Counterbalancing this is the fact that never before have such powerful platforms, tools and data been available for independent day traders.
Minimum deposits have largely fallen to $0 for investors at leading online brokers. However, higher minimum deposit requirements are required for day traders. In the United States, the Financial Industry Regulatory Authority (FINRA) requires that “pattern day traders” must have an equity balance of at least $25,000 in a margin account.
A person is marked as a pattern day trader if they trade four or more times in five business days and their day-trading activities are greater than 6% of their trading activity for that same five-day period.
Forbes Advisor adheres to strict editorial integrity standards. To the best of our knowledge, all content is accurate as of the date posted, though offers contained herein may no longer be available. The opinions expressed are the author’s alone and have not been provided, approved, or otherwise endorsed by our partners.
Dan Blystone has over a decade of experience in the trading industry. He started as a floor clerk at the Chicago Mercantile Exchange (CME) in the currency futures pits. Then progressed to working as a proprietary trader off the floor trading the bund overnight. Later, Dan worked as a retail futures broker. He founded TradersLog.com, which has received tens of millions of page views to date. Dan worked with many leading industry experts on creating educational webinars and archiving them on their YouTube channel.
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