Best Brokers for Day Trading
Based on 97 different variables, here is a summary of the top five stock trading brokers for day trading platforms, tools, and software.
- Interactive Brokers - 5 Stars
- TradeStation - 5 Stars
- Lightspeed - 5 Stars
- TD Ameritrade - 4.5 Stars
- Fidelity - 4.5 Stars
Understanding Day Trading
It is not surprising that all online brokers highly covet day traders and active traders. These seasoned traders require far less handholding than new investors do, and generate much more revenue for brokers every year. The question, though, is: How many trades (buys or sells) must one make to be considered an “active trader” or a "day trader"?
We spoke to numerous brokerage executives, traders, and industry experts, and found 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 applied in the marketing and branding environments that niche brokers such as Lightspeed use the term “hyperactive trader” to distinguish between the two.
An “active trader” is 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.
Day Trading Platforms
Understanding your classification as a trader is critical when you select 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/software 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.
|Interactive Brokers||TradeStation||Lightspeed Trading||TD Ameritrade||Fidelity|
|Stock Trade Fee (flat)||N/A||$5.00||$4.50||$6.95||$4.95|
|Stock Trade Fee (per share)||$0.005||$0.01||$0.006||N/A||N/A|
|Charting - Indicators / Studies||121||274||20||397||166|
|Trade Hot Keys||Yes||Yes||Yes||Yes||Yes|
Our No. 1 pick for day trading, Interactive Brokers, wins this category because the broker caters specifically for active and hyperactive traders. You won’t find the broker’s 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, this broker offers the lowest commissions in the industry.
Interactive Brokers, Lightspeed, and TradeStation all offer what are known as “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 (examples include Citadel, Bats, and KCG) 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 such as Lightspeed, routing a 1,000-share buy limit order on the NYSE will currently net you $0.0014 per share. Lightspeed’s 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 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.
Day Trading Broker Selection Tips
All in all, finding the right broker for day trading first requires defining “active.” It is also important to ensure you have at least $25,000 to comply with the SEC's Pattern Day Trader rule and margin requirements. Next, ask yourself, “How important are low trading commissions?” and, “How important are tools?” Assume that lower trade costs usually mean less quality in such areas as research, trading tools, mobile trading apps, or ease of use. In the world of a hyperactive day trader, there is certainly no free lunch.
Day Trading Brokers Summary
|Online Broker||Best For||Minimum Deposit||Commissions||Overall Rating|
|Interactive Brokers||Low Rates||$10,000||$0.005 per share||5 Stars|
|TradeStation||Platform technology||$500||$5.00||5 Stars|
|Lightspeed||Low Rates||$10,000||$0.005 per share||5 Stars|
|TD Ameritrade||thinkorswim||$0||$6.95||4.5 Stars|
|Fidelity||Active Trader Pro||$2,500||$4.95||4.5 Stars|