Online day trading increased in popularity last year. As people were forced to spend time in lockdown due to the COVID-19 pandemic, many turned to online trading and consumed more internet products and services. On top of that, governments around the world helped households with extra income, and some of that income ended up in financial markets. Trading volumes and the number of trading apps downloaded are also testament to the popularity of day trading.
This guide looks at the best day trading platforms in 2021 and discusses the characteristics that make them the best.
Our List of the Best Forex Day Trading Platforms
To simplify your search for the best day trading platform, we’ve shortlisted a few of our favourites:
What Is a Forex Day Trading Platform?
The notion of a “day trader” has changed over time. It originally meant a trader who kept positions open only during the trading day, and who closed those positions before the markets closed for the day. Since the foreign exchange (forex) markets trade 24/5, the definition has changed to include multiple trading days and up to a trading week. However, the principles remain the same, such as the fact that day traders use short time frame charts: five minute charts, or even less.
A day trading platform is a technological solution offered by the brokerage house to transmit the trading orders for execution. A platform that enables day trading should have very tight spreads (the difference between buying and selling prices)) so that the cost of trading is minimized as much as possible. Such a platform should also be user-friendly and allow automated trading.
How Does a Forex Day Trading Platform Work?
A day trading platform acts as the tool that connects the trader with the broker. The trader has absolute control, in the sense that the trader is responsible for the activity in the account and the orders sent to the broker. The validity of instructions (i.e., when to buy), the quantity, and the prices, are all part of the trader’s risk management system that are enabled by the day trading platform.
Day trading platforms focus on the lower time frames because day traders are mostly scalpers. That is, they enter and exit a market multiple times during the trading day and mainly use technical rather than fundamental analysis. For this reason, a day trading platform should have plenty of technical indicators and all the possible lower timeframes.
Key Features to Look in a Day Trading Platform
The most important thing to consider in a day trading platform is its ability to perform automated trading. Almost all trading robots use lower time frames to scalp their way into and out of the market, so the day trading platform must support automated trading.
Lower spreads are mandatory as well. The lower the spreads, the better for the day trader that wants to minimize the costs as much as possible. Because of the relatively higher trading activity when compared to swing trading, day traders require the lowest costs in the industry.
Pros & Cons of Using A Forex Day Trading Platform
How To Choose the Best Forex Day Trading Platform for Me?
It all should start from your trading style. If you are a scalper that goes in and out of the markets frequently, you would want to use a day trading platform with lower and fixed spreads. It’s hard to find one whose spreads are both low and fixed, but that is the aim.
Another thing to consider is if the trading platform is accessible for on-the-go trading. Traders nowadays are mobile, and the best day trading platform should have similar capabilities regardless of whether you’re trading via the broker’s website, mobile app, or desktop application.
How To Safely Use a Day Trading Platform to Make Money Online?“ A broker handles the orders received from the trader and routes them to the market for execution. For its efforts, the broker charges the trader a commission or a fee, typically embedded in the spreads between the bid and the ask prices. Ultimately, the trader is responsible for the research and analysis that goes into a trade. Therefore, before buying or selling a currency, the trader must ensure that a risk management system is in place so that any mistake will not threaten the trading account. Such strategies might include committing no more than 1% of available funds to any one trade, or always applying a protective stop-loss order to every newly opened position. ”- Nicholas Kitonyi
Short-term traders use day trading platforms to scalp and speculate on the rapid market movements seen in the FX market. We have described some of the features to look for a forex day trading platform, and we’ve suggested some platforms.
Frequently Asked Questions
No. Some brokers choose to avoid regulation by registering offshore. Therefore, part of a trader’s due diligence process is to find out if the broker is regulated (or why not). Consider the added benefits that regulation affords you, such as segregated accounts and negative balance protection.
It depends. Some platforms are more suitable for investing and swing trading, while others — as identified in this guide — are more suitable for scalping. Many forex traders use the MetaTrader 4 (MT4) or MT5 trading platform.
Yes. Besides the classic currency pairs available to trade with a regular forex account, most brokers offer other markets so that you can diversify your portfolio and even hedge based on the direct or indirect correlations between various markets. Other markets include commodities, indices, and individual shares, all in the form of contracts-for-difference (CFDs).
Yes. The procedure is simple, and almost anyone can open an account with a broker within minutes, although it might take a little longer to prove your identity.
There are at least two possible reasons. One reason is that the trader may be charged interest on a leveraged trade held overnight. Another reason is that out-of-hours can cause prices (particularly of stocks) to “spike” or “gap” up or down overnight or at the weekend, so the trader could make a bigger-than-expected loss.
A stop-loss order is another name for a “stop order”, which is a pending order designed to automatically exit an unprofitable position at a small loss before it becomes a big loss.