If you’re a day trader or a prospective one, you need a brokerage that fits your needs well. Unlike casual or buy-and-hold investors — who access the market infrequently — day traders need to optimize for low costs and tools such as trading platforms and solid fundamental research.
What is day trading?
Day trading is the practice of buying and selling a security within the span of a day. The Financial Industry Regulatory Authority (FINRA) identifies pattern day traders as those who trade in and out of a security four or more times in a five-day span, provided the number of trades are more than 6 percent of the trader’s total activity in that same period.
While some traders may hold positions for a few days, a typical day trader likes to be “flat” overnight – which means having all positions closed when the market closes for the day. These traders often try to avoid price movements from any change in sentiment or news that might occur overnight.
Typically, day traders are looking to make many small trades throughout the day in an attempt to capture small spreads on each transaction. Day traders often take advantage of minute-by-minute moves in a security to find an attractive buy price, and when the market has firmed up they look to sell the security, sometimes only minutes later.
Best online brokers for day trading in September:
- Fidelity – Best overall
- Interactive Brokers – Best for high volume
- Tradestation – Best for options
- TD Ameritrade – Best trading platform
- E-Trade – Best for research
What to consider
With a strategy that involves so much trading, one of the primary concerns for a day trader is commissions, or how much is a brokerage going to take with each trade. Regardless of whether a trade is a winner or a loser, the brokerage gets its cut either way — both on the buy and the sell transaction. So savvy traders look to save on trading costs as much as possible, because that keeps more money in their own pockets.
However, traders must balance this concern with the other features of a brokerage that may help them be successful, such as the trading platform, research and tools. So while cost is an important consideration, it’s not the only one.
Finally, when selecting a brokerage, day traders will find that a brokerage’s typical account minimums do not apply to them. Instead, pattern day traders must maintain at least $25,000 of equity in their accounts or they will not be able to day trade, according to FINRA rules.
Overview: Top brokers for day trading in September 2020
Fidelity: Best overall
Fidelity Investments provides the core day-trading features well, from research to trading platform to reasonable commissions. The company’s flagship platform, Active Trader Pro, offers a fully customized look while Wealth-Lab Pro, a backtesting tool, lets you test a strategy against 20 years of historical data. The research on tap is among the best in the industry, with reports from Thomson Reuters and Ned Davis, among others. For all this, you’ll pay no commission on stock and ETF trades, and Fidelity also prides itself on not nickel-and-diming you on other account fees.
Commissions: $0 (stocks and ETFs); $0.65 per contract (options).
Interactive Brokers: Best for high volume
Interactive Brokers brings a lot to the table for day traders – a well-regarded trading platform and low base commissions with the potential for discounts. And if you’re placing huge trades, the broker even discounts its base commission by up to 90 percent. While Interactive Brokers isn’t known for its research, its Trader Workstation platform will help technical traders with charting and streaming news.
In addition, the company has recently launched IBKR Lite, a platform that gives you many of the broker’s top features as well as no-commission stock and ETF trades.
Commissions: $0.005 per share (stocks and ETFs) for the standard platform; $0.65 per contract (options) and volume discounts are available.
TradeStation: Best for options
One of TradeStation’s top features is its flexible and convenient pricing plans, but the broker also offers a fantastic trading platform, too. TradeStation’s base commission for options is in line with the industry standard at $0, and its commission for stocks and ETFs is now zero (on the first 10,000 shares per trade) too. TradeStation’s fully customizable desktop platform allows you to use tons of technical indicators, as well as create your own. And traders will likely find OptionsStation Pro a valuable tool for setting up trades and visualizing the potential payoffs.
Commissions: $0 for the first 10,000 shares per trade and $0.005 per share after that (stocks and ETFs); $0.50 per contract (options).
TD Ameritrade: Best trading platform
TD Ameritrade’s strongest suit might just be its much-lauded thinkorswim trading platform, where in addition to stocks and options, you’ll be able to trade forex, futures and futures options. You’ll have access to more than 400 technical studies, and you’ll have plenty of other tools (charting and a trading simulator, for example) that pro traders love. Plus, those looking for more fundamental research will find plenty. You get all this and there’s no base commission.
(As of November 2019, Charles Schwab has agreed to purchase TD Ameritrade, and plans to integrate the two companies once the deal is finalized.)
Commissions: $0 (stocks and ETFs); $0.65 per contract (options).
E-Trade: Best for research
E-Trade performs well all-around, especially with a discounted commission structure on options, but the broker really shines with its range of fundamental research. Research offerings include the broker’s own market commentary as well as reports from Thomson Reuters and Moody’s, among others. The Power E-Trade platform and the similarly named mobile app get you trading quickly and offer more than 100 technical studies to analyze the trading action.
(As of February 2020, Morgan Stanley has agreed to purchase E*Trade, and plans to operate the broker as a separate unit once the deal is finalized.)
Commissions: $0 (stocks and ETFs); $0.65 or $0.50 discounted (options).
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Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.