Learning to Day Trade - Part 3

Brokers

Selecting the right broker matters a lot. It depends on what type of strategy you prefer (buying or shorting). Fees also matter but if you are trading the correct stocks and are positioned correctly then it does not matter.

For buying you can use almost any broker. These are the ones I like the most:

  1. TD Ameritrade (using thinkorswim)
  2. Interactive Brokers (low fees until you start taking 2000+ share positions)
  3. E-Trade

For shorting it matters more:

  1. Interactive Brokers (has lots of shares available on tons of stocks)
  2. E-Trade (decent borrows but cannot short OTC stocks)
  3. Centerpoint Securities (best borrows)

You can short sell in TD Ameritrade but only larger market cap stocks that a lot of people are holding. For instance, $AMD is always available to short there. If it’s a penny stock, I’d guess there would never be shares available.

You can have multiple brokers and it’s a good idea to do so if you trade multiple strategies. I do longer term swing trades in OptionsHouse (now E-Trade) and short term in Interactive Brokers.

You cannot short sell in a cash or IRA account. You must have a margin account. Margin is different from leverage. Leverage allows you to borrow money from your broker. Do not use leverage.

Overview

  1. TD Ameritrade
    • $6.95 per trade.
    • Free platform with perfect charts.
    • Great mobile app on iOS with charts.
    • Can open an account, withdraw the funds, and continue using thinkorswim/the iOS app for free.
    • Paper trading can be done without opening an account for free with delayed data. It does not work very well though. The limit orders are sort of random and don’t really work.
    • 8:00 AM to 8:00 PM extended hours.
    • thinkorswim works great on Linux but the charts may become laggy the longer it stays open.
  2. Interactive Brokers
    • $0.005 per share (100 shares = $1, 1000 shares = $5, 2000 shares = $10).
    • Inactivity fees if you don’t trade - waived after you pay enough in fees on trades.
    • Market data costs money - I pay for level 1 quotes for NYSE, NASDAQ, and OTC (this gives you real time charts). You do not need market data, you can place orders and use thinkorswim for charts.
    • Charts in Trader Workstation are kind of annoying to work with.
    • Higher minimums to open an account: $3,000 if <= 25 years old otherwise $10,000. I’ve heard this is just to open the account. You can withdraw some of the funds right after.
    • Decent mobile app on iOS with charts.
    • Supposedly has terrible customer support. I made one phone call and had to wait about 10 minutes which isn’t too bad. I opened one ticket about TWS and each response took about a day. No bad experiences so far.
    • Perfect paper trading but you’ll need market data.
    • Full range of extended hours. 4:00 AM to 8:00 PM.
    • Trader Workstation works great on Linux.
  3. E-Trade
    • $6.95 per trade ($4.95 for OptionsHouse users or if you make more than 30 trades per quarter).
    • E-Trade Pro platform costs money.
    • OptionsHouse platform might be free now that they have merged - it’s decent but currently has bugs and it’s not as good as thinkorswim.
    • Decent mobile app on iOS with charts.
    • 7:00 AM to 8:00 PM extended hours.
  4. Centerpoint Securities
    • I have no experience with them since the minimums are crazy high.
    • The best borrows for shorting. It will cost you money though.

Avoid Robinhood unless you plan on making longer term swing trades. I could be using it for my $AMD swing trades but I feel like I’ve outgrown it and was burned by no premarket/afterhours trading before (it’s $10 to access extended hours and the range is terrible) and the bad executions. They default to market orders which is just terrible. On penny stocks you will get screwed by market makers with market orders. You get what you pay for.

These are just the ones that I have personally used and still use today. There are certainly others and they are probably good too, but I’m only giving my opinion on ones I’ve had experiences with.


Part 4 - Trading Journal



Disclaimer

I am not a registered financial adviser/broker/anything. Use this information for entertainment/informational purposes only. Any tickers mentioned are not recommendations to buy/sell/or sell short. They are used as examples only.