Day Trading: An Online Trading Review

If you are interested in new phenomenon of day trading, the following is a brief online trading review:

Overview

Basically you can day trade online in one (or both) of two ways:

1. over the Internet using an online broker’s web-site;
2. using a special piece of software known as Direct Access Trading.

Online broker’s web-site

As with all forms of online stock trading, day trading by way of using an online broker’s web-site provides you access, via the Internet, to day trade.  In order to execute a buy/sell trade, you need to have access to the broker’s web-site and you need to be logged-in to your account.  Provided this is done, you are free to trade.

Direct Access Trading

Unlike day trading with an online stock broker, when you day trade using a direct access trading program you are making use of a special piece of software that instructs a trader on the floor of your chosen exchange to execute the trade.  As no broker is used, the system is known as ‘direct access trading’.

Online broker vs. Direct Access Trading

Before you can decide whether or not you should be day trading using an online broker or the Direct Access Trading system, you need to think about how much (in money and volume) day trading you expect to do.  The reason why is because there are certain benefits to both systems.  For example, Direct Access Trading is faster than using the services of an online broker.  However, using an online broker is considerably cheaper and, provided you are always logged-in to your account, is not particularly slow.  That said, with day trading, the difference between making a profit and loss on the day can come down to a matter of seconds.

The second aspect you need to give careful consideration to when making your decision as to whether you should be day trading using an online broker or the Direct Access Trading system is the level of commissions you’ll be paying.  If you are intending to be a large trader, typically the commissions using the Direct Access Trading system are cheaper.  However, as the provision of Direct Access Trading software also comes with a monthly subscription fee, for those not intending to exercise large volumes of trades, this can be an expensive way to day trade.

Finally…

Whether you decide to use the services of an online broker or a Direct Access Trading system provider, with the speed in which day trades need to be executed either is more preferable than using the services of a conventional broker.

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