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Day Trading and Active Trading Brokers 2017

Blain Reinkensmeyer

Published by Blain Reinkensmeyer


Tuesday, February 21st, 2017

It is not surprising day traders and active traders are highly coveted clients every online broker wants. These seasoned traders require far less handholding than new investors, and generate much more revenue for brokers each year. The question is, though: How many trades (buys or sells) must one make to be considered an “active trader”?

After speaking with numerous brokerage executives, traders, and industry experts, there is really no definitive answer because every broker has a different number based on his/her offerings and business costs. In fact, the term “active trader” has become so loosely used in the marketing and branding environments that niche brokers such as Lightspeed use the term, “hyperactive trader” to distinguish between the two.

Here at StockBrokers.com, we have no problem setting industry standards, and thus will define both from our perspective. We regard an “active trader” as someone who places at least 10 trades or more per month, or 120-plus trades per year. Alternatively, a “hyperactive trader” is someone who trades at least 10 times as much, 100-plus trades per month or 1,200-plus trades per year.

Here at StockBrokers.com, we have no problem setting industry standards, and thus will define both from our perspective. We regard an “active trader” as someone who places at least 10 trades or more per month, or 120-plus trades per year. Alternatively, a “hyperactive trader” is someone who trades at least 10 times as much, 100-plus trades per month or 1,200-plus trades per year.

Active trader categories by total trades

Understanding where you fall as a trader is critical in selecting a broker for day trading. As an active trader, you are likely comfortable paying $4, $5, $6, or even $7 per trade. You want low-cost trades, but a feature-rich platform or research is important to you too; therefore, you are willing to pay more. However, speak to a hyperactive trader or day trader, and you will find the platform design, research, and trade tools don’t matter; cost and execution talks while everything else walks.

Because of this, our ranking in this category considers both types of trader, with the most significant factors being price, speed, and execution, as these are elements both have in common.

Our No. 1 pick for day trading, Interactive Brokers, wins this category because the broker caters specifically to active and hyperactive traders. You won’t find the brokers’ platform built for new investors, and you can mostly forget about research. What you will find, though, are programmable hotkeys and a slew of order types for placing every possible trade imaginable, including algorithmic orders, alongside the lowest margin rates in the industry. Popular among the institutional community, including hedge funds, the broker offers the lowest commissions in the industry.

Interactive Brokers trade ticket

Interactive Brokers, Lightspeed, and TradeStation all offer what are known as an “unbundled” rates, which means they pass 100% of all market rebates (or charges) for adding (or taking) liquidity back to their clients. Many market exchanges will pay your broker for routing your order to them. These rebates are usually no more than a tenth of a penny or two per share, but they add up. See: Order Execution Guide.

Using a broker like Lightspeed, routing a 1,000-share buy limit order on the NYSE will currently net you $0.0014 per share. Lightspeed base rate is $.0045 per share, so the original $4.50 trade now becomes only $3.10, thanks to a $1.40 rebate from the NYSE. This represents a savings of 31 percent. Note, however, this goes both ways, as routing a straight market order to the NYSE instead would incur a charge of $.0027 per share, thus increasing the cost of the trade.

Order routing aside, our other top brokers for day trading shine for different reasons. TradeStation provides three different commission structures with quality executions and an insanely powerful desktop platform rivaled only by TD Ameritrade’s thinkorswim, which also reigns supreme for mobile trading. Fidelity was ranked first overall for Order Execution, providing clients industry-leading trader order fills alongside a competitive platform. We recommend reading our full online broker reviews for a complete breakdown of each broker.

TradeStation desktop platform

All in all, finding the right broker as an active trader first requires defining “active.” Next, ask yourself, “How important is low cost?” and, “How important are tools?” Assume that the lower your trade costs are, overall quality will falter in one or more other areas such as research, platforms, tools, mobile, or ease of use. In the world of a day trading hyperactive trader, there is certainly no free lunch.

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1 Interactive Brokers Logo
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2 Lightspeed Trading Logo
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3 TradeStation Securities Logo
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5 Fidelity Investments Logo
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Get 300 commission-free trades and 2 years to use them - Learn More

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All pricing data was obtained from a published web site as of 2/20/2017 and is believed to be accurate, but is not guaranteed. The StockBrokers.com staff is constantly working with its online broker representatives to obtain the latest pricing data. If you believe any data listed above is inaccurate, please contact us using the link at the bottom of this page. For stock trade rates, advertised pricing is for a standard order size of 500 shares of stock priced at $30 per share. For options orders, an options regulatory fee per contract may apply.

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