Best Online Brokers for Day Trading

Put simply, day trading is an investment strategy based on short-term price movements. The overarching concept is that day trading positions will never remain open after the respective market has closed.

This means that day traders enter a position in the hope of closing it at a profit several hours or even minutes later. Naturally, day trading positions yield a much smaller profit (or loss) margin when compared to a more traditional buy-and-hold strategy.

However, day traders will often enter multiple positions in a single trading session. Furthermore, experienced day traders will look to amplify their gains by trading on margin. This means that the trader is effectively borrowing funds from their chosen broker – which increases both the risk and potential rewards.

Day trading is suitable for many different asset classes, whether that’s stocks, crypto, forex, futures, or options. With that said, day traders need access to markets with high levels of liquidity to ensure that buy and sell orders are executed without delay and without unfavorable slippage.

Pattern Day Trading rule

I should also stress the importance of having a firm understanding of the Pattern Day Trader rule. In a nutshell, this rule dictates that US clients must hold at least $25,000 in margin account funding if they are identified as a day trader.

This will be the case if the trader places four or more positions within the span of five working days.

With that being said, the rule will only be triggered if the total value of positions placed during the five-day period amounts to at least 6% of the overall margin balance.

According to the Financial Industry Regulatory Authority (FINRA), pattern day traders are identified as those who trade in and out of a security four or more times in a five-day span, provided the number of trades are more than 6 percent of the trader’s total activity in that same period

Day trading brokers in the US are responsible for complying with this regulatory demand. This means that if the client is identified as a Pattern Day Trader, and they do not hold at least $25,000 in their margin account, the broker will prevent further positions from being placed.

Ultimately, the Pattern Day Trading rule means that this particular strategy is only suitable for those with sufficient levels of capital. Beginners and those on a budget will, therefore, likely be more suitable for a conventional long-term investment strategy.

How to make money from day trading

It is possible to make money from day trading by consistently predicting the future direction of short-term market sentiment, whether that’s stocks, crypto, or any other asset class for that matter.

The core concept is to speculate on whether an asset will rise or fall in value, over the course of the next few hours or even minutes. Unlike traditional investing, day trading is all about making small but frequent gains.

For instance, let’s suppose that a day trader buys Apple stock at 10 am and closes the position at 1 pm, securing gains of 1%. This would represent a successful day trading position, considering the length of time that the trade remained open.

Crucially, day trading is an investment strategy that is largely unsuitable for beginners. The reason for this is that day traders place most of the emphasis on technical information, which requires a high-level understanding of how to read, analyze, and evaluate pricing charts.

This means that day traders will need to have an unparalleled understanding of how to deploy technical and economic indicators, in addition to other analysis tools that will likely intimidate a casual investor that is just starting out.

For example, I found that one of the best brokers for day- trading, from the perspective of beginners, is eToro. The reason for this is that the eToro trading suite is user-friendly and the broker requires a minimum deposit and trade size of just $10.

At the other end of the scale, I found that experienced traders will likely find Interactive Brokers more suitable. As I discussed earlier, they offer an institutional-grade trading suite that comes packed with high-level charting tools, strategy testers, screeners, and more.

Irrespective of the trader’s previous experience, it is imperative to have a firm understanding of what fees the respective day trading broker charges.

Bearing in mind that day traders will typically target small margins, the process will only be worthwhile if the chosen broker offers competitive trading fees. This is why eToro remains popular with day traders, as the platform offers 0% commission trading on stocks and ETFs.

US-listed markets such as the NYSE and NASDAQ, for example, operate between 9:30 am and 4:00 pm (EST), Monday to Friday.

Some online brokers in the US enable after-hours trading, each of which will have its own permitted timeframes.

For example, Robinhood enables traders to enter stock positions until 8 pm, which offers an additional four hours after the markets have closed. TD Ameritrade takes things to the next level by offering 24/5 trading between Sunday and Friday.

However, I should clarify that opening or closing a position before or after the market has opened or closed, respectively, falls outside of a traditional day trading strategy. As noted earlier, day traders will always ensure that positions are closed before the market shuts for the day.

Furthermore, day trading outside of standard market hours comes with additional risks – especially for beginners. For instance, out-of-hour trading attracts significantly less liquidity, so spreads will be wider. This can result in less favorable pricing and larger levels of volatility.

In this section, I cover the most commonly traded markets that are favored by day traders in 2023.

Day trading stocks

Many day traders focus exclusively on stocks. When trading large-cap stocks on the NYSE and NASDAQ, day traders know with certainty that there will always be sufficient levels of liquidity.

Moreover, most of the online brokers support 0% commission stocks.

This benefit should not be overlooked, considering that day traders generally target small profit margins.

Day trading cryptocurrency

Cryptocurrencies like Bitcoin and Ethereum not only operate in a multi-billion dollar industry, but this marketplace can be accessed 24/7.

Cryptocurrencies are a lot more volatile than stocks, which is arguably both an advantage and disadvantage, depending on the level of experience of the day trader.

I found that one of the best brokers for cryptocurrency day-trading is eToro, with the platform supporting more than 70 cryptocurrencies at competitive fees.

Day trading forex

The foreign exchange (forex) industry is the largest day trading market globally. Currency pairs like EUR/USD and GBP/USD can be traded at hugely competitive spreads and come with unparalleled levels of liquidity.

When day trading major currency pairs, beginners will appreciate the low levels of volatility on offer. Experienced day traders might instead target exotic currency pairs, which attract much more volatile pricing swings.

Day trading commodities

Commodities like gold, silver, natural gas, and oil are also popular with day traders.

Successful day traders in this marketplace will often rely on fundamental data, such as geopolitical events, production and supply statistics, and broader economic conditions.

Day trading indices

Indices are also popular with day traders for their high levels of liquidity and modest pricing swings.

Some of the most traded indices in the day trading marketplace include the S&P 500, Dow Jones, NASDAQ Composite, and FTSE 100.

Not to mention that the eToro trading suite is user-friendly and comes packed with useful analysis tools that are suitable for newbies.

Another reason why I found that eToro is the best day trading broker for beginners is that its fee structure is both transparent and easy to understand. For instance, all stocks and ETFs (US and foreign-listed) are commission-free, and crypto can be traded at a flat rate of 1%.

Robinhood is also suitable for beginners, with traders having access to a wide range of 0% commission markets, most of which can be traded from just $1. However, Robinhood requires users to sign up for a gold account ($5 per month) to access some of its core features, which in my view is a slight drawback.

My verdict?

In summary, I have discussed and reviewed the five best online brokers for day trading for March 2023. While the likes of Interactive Brokers and Robinhood are options worth considering, I found that eToro is the overall best day trading broker in the market, especially for active traders.

eToro enables US clients to trade stocks and ETFs at 0% commission, which includes both domestic and international exchanges. eToro is also competitive when it comes to cryptocurrency trading commissions and USD deposits are processed fee-free.