Tools and Services Needed for Day Trading
To get started as a day trader, here's what you need
Day trading requires that you have a set of tools and services in order to do your job effectively.
Some of the required tools you likely already have. Modern-day trading is electronic, so day traders access the financial markets via the internet. It's also a good idea to have a telephone in case you need to call your broker, and you will need a computer or laptop to access the internet and make your trades.
Other tools you may not have yet. These include a direct access brokerage, real-time market data and a trading/charting platform.
All these tools and services are broken down in greater detail below, so you can see what you need, and get your day trading career started on the right path.
Hardware and Software
The following tools are the hardware (such as a computer), software (such as charting software), and other physical items (such as a telephone) that are needed for day trading.
- Computer or Laptop: Technology is constantly changing, so make sure you have a computer with enough memory and a fast enough processor that it isn't constantly lagging, crashing or stalling (taking forever to load) while you have your trading software running. Having two monitors is preferred, but not a necessity.
- Telephone: If your internet isn't available, you need a way to contact your broker other than email or online support. Have a landline, cell phone, or both available to you whenever you are trading. Have your broker's phone number programmed into your phone in case you need to call them. Remember, you may not be able to look up their number if you don't have internet access or your computer crashes.
- Trading/Chart Software: Most brokers (discussed below) provide a number of software options that traders can use to trade and monitor the price charts of financial assets. Day traders want to use trading software that allows them to easily pull up price charts, with an option to view tick charts and timed charts (1-minute, 5-minute, hourly, etc). Different software is designed for different types of traders. Day traders need software that allows them to make trades quickly, without a lot of redundant or unnecessary steps. NinjaTrader is popular software that allows for trading and charting. Not all brokers support all trading platforms though, so there is a balancing act between finding a broker you like (discussed below) and finding the trading software you like.
The following tools are the services (such as Internet access) that are needed for day trading.
- Internet Access: Your internet should be fast enough that you can load web pages instantaneously. If it can't do that, your internet connection may be too slow for day trading. When you day trade thousands of data points are streaming to your computer each second, as asset prices move. Your internet needs to keep up with that stream of constant data. If it can't (or if your computer is too slow to process the data), you will experience lag. Lag is when you are receiving old data instead of the newest data...basically, you have a data backlog and can't see current prices. Test out the different internet speeds offered by your internet service provider. Choose the one which provides fast webpage load-times and doesn't cause your trading software to lag.
- Backup Internet Access: Services outages occasionally occur. Ideally, you want to be able to access your trading platform if an internet service outage occurs. A convenient way to do this is through a Smart Phone, which has internet access through a mobile data plan. The mobile data plan should be provided by a different company than your internet service provider. That way, if your normal internet goes down, you can access the internet and your broker through your Smart Phone mobile plan.
- Day Trading Brokerage: To day trade you need a broker--a company that facilities your trades. Not all brokers are created equal, and some cater to day traders more than others. Day traders make a lot of trades, which means they require a broker that provides low commissions as well a trading software that works well for day trading. Major banks offer brokerage services, but typically their commissions are high and they don't offer customized solutions to day traders. Therefore, smaller but regulated brokers are recommended for day traders. If you have a trading software that you like to use, then search for brokers that allow their traders to use that software. That will narrow down the number of brokers you need to research and choose from.
- Market Data: Trading requires a constant stream of financial data, created by the movement of prices in the assets and markets you are trading. Your broker will provide you with market data, but you need to request the type of data you want. If you want to trade stocks, you need stock market data. You must specify if you want data for the NYSE and/or NASDAQ stock exchange, for example, and if you want to see Level II data. If you trade futures, you need to specify which contracts you are trading so you can see the pricing information for that specific contract. With many brokers you pay for stock and futures market data, so only subscribe to data you need. Some brokers give you all market data for free, but typically their commissions are higher in exchange. Forex brokers typically provide data for all forex pairs for free, so you just need to open a chart to see the price data.
Final Word on Day Trading Tools and Services
These are the basic tools you need for day trading. A reliable and quick computer or laptop is a must, along with a telephone and trading/charting software. You also need a quick and reliable internet connection. Also, consider getting a Smart Phone with a mobile data plan that you can use as a backup internet source. Find a broker you like, that is regulated, offers low commissions and provides a trading/charting software you like. Once that is all in place, then subscribe to the market data you want, based on which markets you will be trading.