Table of contents:
- 1 How long has the brokerage company existed?
- 2 Is the company regulated?
- 3 Which trading software is used?
- 4 What is the minimum deposit for a trading account and what is the credit line?
- 5 What are the fees per trade?
- 6 What are the additional charges?
- 7 How extensive is the broker’s short list?
- 8 What are the trading hours?
- 9 For Forex and CFD brokers: What is the spread?
The success or failure of day trading also depends on the right choice of broker. Not only the fees to be paid are decisive, but there are also other important criteria. The following checklist should give you a little help in choosing your broker for day trading.
On the Internet you will find many offers, most of which look very appealing at first glance. Check the conditions carefully and compare the details, it is worth it. There is also our broker recommendation.
How long has the brokerage company existed?
The answer to this question shows you how much experience the broker has with his order systems and how routinely the problem can be dealt with in case of an error. The experience of the traders on the phone also plays an important role if you ever need to place an order by phone or need to clarify a problem with an order.
Is the company regulated?
In any case, you should only choose a broker that is at least supervised by the Federal Financial Supervisory Authority (BaFin). For English brokers the FCA (formerly: FSA) is an equivalent supervision, for US brokers the SEC.
Which trading software is used?
A stable, fast and sophisticated trading software is indispensable for professional day trading. Important is a fast order entry, additional functions such as order book view (Level II prices) and absolute stability. A software crash during a trade can cost a lot of money! A German provider for stock trading with a very mature platform is for example Lynx Broker (advertising, affiliate link).
A web browser based trading platform should not be used for professional daytrading. For the Forex Trading the program Metatrader is very widespread. It is very stable, easy to use and can be extended by many free or paid elements.
You can get to know the functions by a demo account.
What is the minimum deposit for a trading account and what is the credit line?
Most Direct Access Brokers have set a minimum deposit. Due to new legal regulations in the USA, the minimum deposit for day trading with shares is $25,000. Most brokers also offer you trading on credit (margin). If this is too much for you to handle, then CFD trading may be a good choice for you. Also with Forex trading the minimum deposits are much lower.
What are the fees per trade?
Even a saving of only $2 per trade can make a big difference when day trading at the end of the month. Also ask for discounts for especially active traders. Some brokers offer a full price per trade, and some add surcharges for using different order systems to the basic fees.
What are the additional charges?
With some brokers, there are additional costs for account management or the return transfer to your bank. Also some houses have an “inactivity fee”, that means an additional fee if you do not trade during the quarter. The costs for trading on credit (margin) can also vary considerably. Be sure to compare all costs that are incurred and not just the basic fee per trade.
How extensive is the broker’s short list?
This is a very important question for the active trader in shares. Only shares that are on this list can be used for shortening. Especially with smaller companies the list is often very short, and so you miss important opportunities for profit.
What are the trading hours?
Almost all brokers for US stocks allow trading from at least 09:00 EST (New York time, which is 15:00 our time). Various ECNs are available at this time. Most companies allow trading until 04:30 EST.
For Forex and CFD brokers: What is the spread?
With most Forex brokers you pay no fees, the broker earns on the spread. The spread is the difference between the bid and ask price. At the moment it can be 1-4 pips depending on the provider. Many traders neglect this difference, but in the long run it makes a big difference!
An example calculation: A standard forex lot in EUR/USD has a pip value of $10. If you only make 5 trades a day, that’s about 1,000 trades per year, a difference of 3 pips means a difference of $30,000 in your profit calculation!
Do you want to know more about pip, spread and forex rates? Then take a look at the Forex quote page.
Broker recommendation for Forex trading
For Forex, CFD or stock trading we have written a detailed broker recommendation with reasons.
Broker recommendation for stock trading
I have had very good experience in stock trading with the company LYNX Broker. The trading platform needs a little training, but then it is very fast and stable and offers a lot of possibilities for the trader: It offers the possibility to trade in real time on more than 90 stock exchanges in 20 countries worldwide – and all this at very favourable conditions. A free information pack can be requested on the Lynx Broker page.