Day traders try to profit from the moves in a particular stock, rapidly buying and selling stocks throughout the day, according to the Securities and Exchange Commission. The strategy is risky and has relatively limited rewards, but it’s also an active, engaged approach that can fit well with certain types of traders looking to keep themselves in the action.
But getting the best day-trading platform can make or break your potential success. Not only do you need the robust collection of tools included in day-trading software, but with the need to make so many different trades, commissions and fees will quickly begin to add up if you don’t have the right commission structure.
So, here’s a look at the best brokers for day trading and why they might — or might not — be right for you.
|Best Brokers for Day Trading|
|Broker||Trade Commission||Min. Deposit/Balance||Fees|
|Charles Schwab||$4.95||$1,000||$0 in opening and maintenance fees|
Options trade: $4.95 + $0.65 per contract
|TradeStation||$5.00||$500||Annual fee of $50 applied to accounts that fail to maintain an average end-of-month equity balance of at least $2,000|
Clearing fee of $0.0002 per share for every transaction
|TD Ameritrade||$6.95||$0||No annual fee listed|
|Fidelity||$4.95||$2,500 for certain accounts||$0 annual fee|
$4.95 for options trade + $0.65 per options contract
|Interactive Brokers||$0.005||$10,000||Standard activity fee of $10 minus commissions if you have less than $10 in monthly commissions and under $100,000 in equity|
Options trades: $0.70 per contract; $1 minimum per order
|Ally Invest||$4.95||$0||Options trades: $4.95 + $0.65 per contract|
Volume/Balance Pricing: With $100,000+ average daily balance and/or more than 30 trades per quarter -> Stock/ETF commission reduced to only $3.95 per trade; options become $3.95 + $0.50 per contract
|eOption||$3.00||$500||Options trade: $3.00 + $0.15 per contract|
All mutual fund trades: $5
|Merrill Edge||$6.95||$0||Options trades: $6.95 per trade + $0.75 per contract|
$0 annual fee
Best Brokers for Day Trading
Day trading is usually intensive and focused, necessitating fast access to different data points. It also involves trading early and often, so commissions and fees can add up quickly if you’re not with the right broker. Day traders will also need to keep an especially close eye on things like options trading costs and margin rates where other investors might not.
And finally, it’s important to understand the “pattern day trader rules” from the Financial Industry Regulatory Authority as they effectively make the account minimums moot for many day traders. The rules consider you a “pattern day trader” if you buy and sell a stock within the same trading day four or more times in five business days, and your day-trading activities are more than 6 percent of your total trading activity for the same five-day period, according to FINRA. The rules also require that a pattern day trader must have at least $25,000 in their account to reflect their increased risks.
So, although a lower account minimum has some value — you might want the option to start small before kicking into a gear that will trigger the pattern day trader rule — it’s largely irrelevant to many day traders.
Charles Schwab offers many of the necessary tools for traders through its StreetSmart Edge platform, including real-time data and a number of tools to help you identify potential trades and get ideas for new strategies. Margin rates range from 7.575 to 9.325 percent and you can get a bonus of 500 commission-free trades by enrolling and making a qualifying deposit.
That $4.95 charged per trade is right in line with some of its competitors, with three other brokers in this roundup charging either $4.95 or $5.
TradeStation makes the hard sell on the quality of its trading platforms technology and tools, offering up TradeStation Analytics and its robust kit of tools for viewing and analyzing data. That includes RadarScreen — a real-time market scanning tool to keep you aware of what’s happening — and the OptionStation Pro platform to analyze options trades.
That $0.0002 per-share clearing fee can quickly become an issue, though, if you’re making enough high-volume trades.
Learn These: 5 Best Day-Trading Strategies
It’s not hard to see what the biggest liability is for TD Ameritrade: that $6.95 commission fee. However, in exchange for those potentially higher costs, you’ll get access to TD Ameritrade’s thinkorswim platform that offers “elite-level trading tools” and resources geared towards active traders.
And, if you open a new account, you can avoid those commissions for the first 60 days and get up to a $600 bonus.
Fidelity offers a broad portfolio of research and advice, and traders have access to a robust platform of tools with Active Trader Pro including real-time analytics, Strategy Ideas, Option Trade Builder and Trade Armor.
And, if you fund a new or existing eligible account, you can get up to 500 free trades, depending on how much you deposit, for two years.
More Fidelity: 6 Best Fidelity Mutual Funds — Which One Is Right for You?
The per-share trading fees mean that — when comparing Interactive Brokers to the competition — you need to have a clear sense of your trading strategy. If you routinely make trades in blocks of 1,000 shares or more, you’ll likely end up paying more than you would on most platforms that charge a per-trade fee. However, if you plan to make a lot of low-volume trades, you could save a lot of money.
That said, there’s also an option for an alternate tiered pricing structure that can give even better price breaks on larger orders, and an alternate pricing structure for options.
Ally Invest includes several incentives for active traders that could make it especially attractive to day traders, including a reduced per-trade fee. When you have an average daily balance of more than $100,000 in the prior quarter, commissions on stock trades drop to $3.95 per equity trade.
Additionally, Ally advertises 24-7 support, mobile access to tools from anywhere and offers a cash bonus up to $3,500 for new accounts and credits the transfer fees from other firms up to $150.
A number of factors could make eOption more attractive for day trading, the biggest of which is likely the $3 per-trade commissions. But the $3 options trades — with $0.15 per contract — and low margin rates that range from 4.25 to 6.75 percent seem to indicate a commission structure that is specifically geared toward day traders.
Although the $6.95 per-trade commission is high, Merrill Edge does offer options where you can receive up to 100 $0 stock and ETF trades a month with Preferred Rewards.
Qualifying generally involves minimum account balances of $20,000-$100,000 and banking with Bank of America. So, while day traders will probably make more than 100 trades a month, you might still find that you’ll save over competitors.
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