What Kind of Trading Platform Is Required for Day Trading?

by Tom Streissguth

A day trader profits by making short-term trades in stocks, futures, currencies or stock indexes. The trades are closed out in a few minutes or hours and never held open past the daily close. Day trading is a difficult skill to master and one in which a successful trader needs to access and understand a lot of fast-changing information. For the best chance at profitable day trading, you need a platform that gives you several necessary knowledge tools, which you can tailor to your individual trading style.

Real-Time Quotes

Delayed quotes, such as those provided by Yahoo Finance and other free sites, won't cut it for day trading. You need streaming, real-time quotes to keep on top of price swings as they occur. A sudden rise or fall in a stock's price can bring a quick opportunity, but by the time a delayed quote is posted, the chance for a profitable trade may disappear as other traders make their moves. Level II quotes give you information on the trades made by market makers in the individual stocks.

Bid/Ask Spread

A good trading platform will also show you the bid/ask spread, reflecting the current price for buying (the ask) or selling (the bid) shares. The ask is always higher than the bid, so no matter if you're long or short, you must overcome the spread by having the stock price move in the right direction before you close out the position. The wider the spread, the less likely you will be able to make a profitable trade, as it takes a wider swing in price to turn the position in your favor. The platform should show not only the bid/ask but also the size of the last trade on both sides.

Last Trade and Automated Systems

A day-trading platform should show whether the last trade in a stock resulted in an up or down tick. This is usually indicated by a green "up" arrow or a red "down" arrow, or flashing green or red on the last price, reflecting the most recent movement of the stock. Automated trading systems allow you to program the parameters for a buy or a sell; the software does the work and executes the trades based on the tick signals and other information provided by the platform.

Open Order Volume

Ordinary volume shows the number of shares traded on the day; open volume shows the size of the trades still to be filled and the prices associated with those trades. Day traders compare open order price and volume with the current ticker price and last trade (volume and up tick or down tick). If most of the open orders are on the high side, you can be relatively certain that the price will rise; if the heaviest volume is shown for a lower price, then the stock may be headed down.

Charts

Good trading platforms have customizable charting software that allows you to plot a stock price over a selected time and with the technical indicators you watch. Dozens of useful indicators can reveal trends in volume and price. The time increments can be set in months, weeks, days, hourly or even as a tick chart, which records price and direction with every trade. Technical traders rely on an accurate reading of these signals to support their trading methods; the more consistent the method, the better chance they have to realize a winning strategy.

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