Choose the Best Broker for Day Trading
by Meir Barak | based on content from the Market Whisperer – day trading book
It’s completely natural to be wary of depositing money into the bank account of a broker you don’t know. If you want to sleep better at night, knowing that your money is safe, make sure that your broker is operating within the appropriate regulatory framework. This means that your money is supervised, is separated from the broker’s own ongoing activities, and is insured in the event that the brokerage firm gets into financial trouble. The insurance provided should not be only that of the broker, but also of a reliable, external organization. Clients of U.S. brokers are insured up to a limit of $500,000 per account if the broker is a member of the Securities Investor Protection Corp. (SIPC), while clients of European Union brokers enjoy the automatic cover of the ICF (Investor Compensation Fund) for up to €20,000 per account. The ICF covers all of Europe and insures every deposit, up to this amount, in every European financial organization.
Ask Questions When You Choose the Best Broker for Day Trading
The following 12 questions will help you choose the best broker for day trading. Whittle down your list of potential brokers according to the points you award to each one.
- Is the broker well known? Does the broker have long-term experience operating according to the regulations?
- Do the regulations under which the broker operates provide for insurance of your money? If so, what amount is covered?
- What is the minimum execution cost?
- How much will you pay beyond the minimum? (This is usually a fixed price per share.)
- Will your broker allow you to deposit less than $25,000 and still operate as a day trader?
- Will your broker allow you to trade on margin?
- Does the broker collect a fixed monthly fee for providing a trading platform? If so, how much?
- Does the broker collect a fixed monthly data fee for providing information of any kind?>
- Does the broker’s trading platform allow you to observe real-time charts?
- Does the broker’s trading platform allow direct access to stock exchanges?
- Is the broker’s trading platform a downloaded, installed, and dedicated application, or is it only web-based?
- Will your broker let you perform simulated “paper trading” on a “demo platform”
After You Choose the Best Broker, Open Your Day Trading Account
After you’ve found a broker to your liking, check the broker’s website for information about opening a stock trading account. Opening a live trading account is a simple procedure. Most brokers will be happy to help you complete the process in one brief phone call, or you can look for the forms on the internet and complete them yourself. After the forms have been submitted and certified, you will be able to transfer money into your account. When the funds have been received and credited by the broker, usually within 24 to 48 hours, your account will be activated. You can then download the live trading platform and install it on your computer. When you first open the live day trading platform with your dedicated password, you will be able to see your initial deposit awaiting your order. The entire process should take between one to five days to complete.
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