Six considerations when choosing a day trading stock broker.
This page will give you six key measurements to use when choosing a day trading stock broker. So, get out a piece of paper and write down what's important to you as you read this text.
The game of day trading involves building a team. As with any other game, the people and institutions you choose to be part of your team will help determine your success. Since choosing a day trading stock broker is such a huge part of that team, we'll focus on that key player here. We'll review six areas. As you compare one stock broker to the next, you can use these six areas to choose the best day trading stock broker to fit your needs.
Most new traders focus soley on price when it comes to choosing a stock broker. They figure it's just someone to execute their trades, so nothing else matters. As you'll learn, there's more involved. A "bare bones" broker will offer little in the way of charts, they may not offer a local broker for face-to-face account issues, and their help desk may be slow.
You cannot day trade without a good charting service. Your day trading broker may offer basic charts for free if your account qualifies in equity volume and trading frequency.
I cover charts in greater detail later. But, in this section, I just want you to know this is one area where a deep discount broker may cut their services. This is fine if you'll be using another source for your charts.
You should also be aware that your day trading stock broker may offer delayed data at one price and real-time data at a higher price. If you're day trading for a living, then this is important. Delayed data for the day trader simply won't work. You need to know the price of the stock right this second and you need a chart that provides the same information. If you're not day trading, then this isn't critical. But, for the day trader, it is essential.
Some day trading stock brokers provide local offices and real brokers you can talk to. If that is a service that's important to you, then open your account there. Some brokers will offer investment advice and training. Others are there mainly to take phone trades from clients.
So, there's a difference even among live brokers in terms of the services they offer and the advice they're allowed to give you. If you find a broker you like, then call them and interview one of the brokers. Ask them questions and explore their services.
Trading with margin allows you to borrow additional funds from your broker for the purpose of trading. Some brokers are more generous than others. Some readily allow margins of two times your equity amount. So, if you have $25,000 to invest, they will allow you an additional $25,000 in margin, giving you $50,000 for trading. This is great if you know what you're doing. And, eventually, you'll be ready to leverage margin + knowledge in order to earn more money.
Other brokers are tighter with their margin for new traders and base their decision on experience and the amount of equity in your account.
I have heard that some brokers will allow even greater amounts of margin, but they also stipulate that no trades can be held over-night.
And then some brokers will allow a certain amount of margin when you open the account and then increase that leverage as you prove yourself in the trading game.
At some point, if you trade stocks long enough, you will have this experience. You'll be sitting at home, trading stocks, and the power will go off in your neighborhood. Or the broker's online service malfunctions. You are left with large amounts of money invested, watching the price closely to determine your exit point, and suddenly you're unable to trade.
When this happens, you'll be glad to know that your day trading stock broker has a phone number you can call to finish the trade. Some brokers are better at this than others. But, the risk of a deep, deep discount broker is that their off-line services may be slow.
Just something to consider. At the very least, know the toll-free number you should call when this happens to you.
The same principle applies to the help desk as well. How quickly do they respond when you call them? Are the customer service reps knowledgeable and courteous? It all adds up.
Some day trading stock brokers offer online forums for their members. If you like interacting with other traders, then a broker's social networking services will appeal to you. These forums allow you to discuss stocks and strategies with other traders. (Note: start-day-trading.com will have an online forum for day traders in the near future.)
Then again, some forums are simply a place for the clients to help each other because the broker has been so unhelpful. So, the forums are a good place to listen to the complaints of some of their clients.
One footnote on forums. Don't go chasing after every stock mentioned in an online forum. People have hidden agendas sometimes.
These six considerations will help you sort through the day trading stock brokers who want your business. Go through thse six areas and decide what's important to you. Click on any of the links to compare fees and services.
If you feel that you've made a bad decision regarding your broker, then you can always change brokers. It will take several days for your funds to be transferred to the new broker account. But, it's best to be happy with your broker choice. You'll be spending a lot of time with them.