Best Online Brokerage for Day Trading - 2024 Guide

Best Online Brokers for FOREX Day Trading

Best Online Brokerage for Day Trading 2024

There are several outstanding day trading brokers for beginners. As always, it's important to safeguard your investments by partnering with a broker that has a proven history of success and a hunger for constant innovation. Undertaking thorough research is the key. Take a look at our top online brokers that offer day trading:

1. ICM - Capital 91.10: Best Deposit and Withdrawal Broker

2. Tradeview - 90.00: Trusted broker that offers very low trading costs as well as comprehensive financial literacy materials for its clients.

3. XTB - 85.55: Best Customer Service Broker

4. IG - 85.45: Best Regulations Broker plus Convenient Platform

5. Saxo Bank - 80.09: Excellent Private Trading Platform

6. CMC Markets - 80.07: More than 9,000 Assets

7. ThinkMarkets - 80.05: Aimed at the Audience of Traders

What is Day Trading?

Day trading is when retail traders buy and sell a security multiple times on the same day to make a profit from short-term movements. They deal in securities like FOREX, bonds, stocks, and exchange-traded funds (ETFs). To qualify as a day trader, you must exit all your trades at the end of a daily trading session. 

Some day traders are discretionary traders, which means they watch market conditions and decide when to enter and exit trades based on their sense of whether they will be successful. Other types of day traders deal more systematically, automating strategies along a set of predetermined rules.

Day trading originated in Wall Street, where highly skilled professional traders travelled to a stock exchange and traded all day before closing their positions by the final bell. However, with the growth of online brokerage firms, backed by powerful platforms and instantaneous newsfeeds and low commissions, home-based traders can now replicate the day-trading format popularized by professional traders.

How Does Day Trading Work?

Day trading can make you a lot of money if you do it right. Of course, we must also say that you can just as easily lose money. Traders who are new to this type of trading are in for a bumpy ride if they do not approach it with a well-thought-out strategy. 

The speed of the market and the sheer number of transactions you need to make day trading worth your while mean that it is vital you have a strong plan.

Normally, long-term investors try to buy low and sell high as a basic concept. It may take several days or weeks for their trades to reach a point where they are content to close them. Some longer-term instruments, like bonds, require that you hold on to them for months. 

With day trading, investors look to opportunistically profit from daily price movements in any direction. Relying on intraday price fluctuations to make them money, they rely on rapid order execution of instruments that trade in high volumes and are characterized by high volatility. The FOREX market and the stock market are perfect examples of this.

Day traders use several tools at their disposal to make the most of each trading day. One example is how they use leverage to profit from movements in markets. Here are some other key characteristics of day trading:

• Day traders are normally well-educated and well-capitalized.

• Day trading requires traders to be highly disciplined and objective.

• Day trading requires a sound strategy informed by technical analysis.

Day trading is certainly an exciting field in which to play. Yes, the potential profits are a major draw, and they always will be, but many traders appreciate the thrilling cut and thrust of making deals in a highly liquid and volatile space.

One aspect of which day traders must make the most is using the news to their advantage. For this reason, many traders watch scheduled announcements of corporate earnings, economic updates, or interest rate changes with great attention. They come to understand how market sentiment affects market psychology and they use it to their advantage. Some of the most common trading strategies day traders use are:

• Scalping: This is where traders attempt to make small profits from minuscule price movements throughout the day.

• High-frequency trading (HFT): Using advanced algorithms, traders look to make the most of short-term inefficiencies that exist in every market.

• Range trading: This is a strategy where traders identify a range of fluctuation outside of which they believe an instrument will not stray, and they only trade inside that range.

• News-based trading: By watching important news updates, traders can anticipate if markets will be buoyed or deflated by important performance or policy updates.

How to Choose the Best Online Broker for Day Trading FOREX

The Need for Regulation and Licensing

Commissions and Fees

• Spreads: In FOREX day trading, a spread is the difference between the price at which a trader can buy (ask) and the price at which they can sell (bid) a currency pair. The spread can be categorized into two main types: fixed and variable. 
• Fixed Spreads: As the name suggests, fixed spreads remain constant regardless of market conditions. They don't change during the day and are generally set by the broker. Some traders prefer fixed spreads because they provide predictability, especially during times of high market volatility. 
• Variable Spreads: These spreads fluctuate based on market conditions. During times of low liquidity or high volatility, variable spreads can widen. However, during times of high liquidity and normal market conditions, the spreads can be very narrow. This type of spread is a direct reflection of market supply and demand. 
• Example of Good vs. Worse Spreads for EUR/USD: A good spread for the EUR/USD currency pair might be around 1.4 pips. This means that if the bid price is 1.1000, the ask price would be 1.10014. A worse spread could be significantly higher, let's say 3.0 pips over the bid price. In this scenario, if the bid price is 1.1000, the asking price would be 1.1003. Traders always prefer narrower spreads because the cost of entering and exiting a trade is lower. However, it's essential to consider other factors, like the broker's reliability, platform features, and overall trading conditions when choosing among brokers offering different spreads. This article explains more about this important concept.
• Trading fees: These are commissions charged by brokers for executing orders on the sale or purchase of securities, including stocks, commodities, options, or exchange-traded funds (ETF). Trading fees vary from firm to firm, so it's important to verify a brokerage's fee schedule before deciding to use their services
• Management or advisory fees: These are fees charged by investment advisors for managing a client's portfolio. They are typically a percentage of the assets under management.
• Trading platform fees: Some brokers charge fees for using their trading platforms. These fees can range from $50 to more than $200 per month.
• Paper statement fees: Some brokers charge fees for paper statements. Opting for emailed statements and notifications can help avoid these fees.
• Account closing or transfer fees: Some brokers charge fees to transfer or close an account. Some brokerages will offer to reimburse transfer fees incurred by new customers.

Reliability

Account Minimum

Execution Speed

Tools, Education, and Features

Promotions

Customer Service

Technical Support

What are the Risks of Day Trading?

• execution speed, 
• trading capital, 
• access to powerful technology, and 
• software knowledge.

How Leverage and Stop Outs Can Work for You

Leverage

Stop Out

A stop-out refers to a situation where a broker automatically closes some or all of your open positions to prevent your account from going into a negative balance. To be clear, this is an unwanted situation on your part, as it means something has gone wrong with your trading strategies.

This is especially relevant for traders using leverage. The stop-out level is typically expressed as a percentage, representing the margin level at which the broker starts to close out open trades.

Here are the three most common stop-out levels:

0% Stop-Out Level: 

At this level, when the margin level of the account drops to 0%, the broker will automatically close all open positions. This is the most aggressive stop-out level, and it gives no room for your positions to recover, even if the market turns in your favor immediately after reaching this level.

Here's how it works:

Imagine you have a day-trading FOREX account with a balance of $10,000 and you've opened several positions in the market. Your broker has a 0% Stop-Out Level policy, which means that if your margin level drops to 0%, they will automatically close all your open positions to prevent further losses.

• You start with a $10,000 trading account balance

• Using 30:1 leverage, you can control $300,000 worth of currency with your $10,000 account

• You open a position in EUR/USD with a notional value of $300,000, and the margin required for this trade is $10,000 (3.33% of the notional value)

• The market moves against your position, causing your account balance to drop to $9,000

• If your losses accumulate, your account balance decreases, and your margin level (account equity divided by used margin) drops accordingly 

• When it reaches 0%, the broker's 0% Stop-Out Level policy comes into play

50% Stop-Out Level: 

Here, if the margin level drops to 50%, the broker will start closing out positions. It offers a bit more flexibility compared to the 0% level. The broker will typically close the most unprofitable positions first, and if that's not enough to bring the margin level back above 50%, more positions will be closed until it's achieved.

100% Stop-Out Level: 

A 100% stop-out level means that when a trader's equity equals the margin required for the open positions, the broker will start closing those positions. It's important to know that this is similar to the 0% level but might be worded differently, based on broker terminology.

It's worth noting that while stop-out procedures are meant to protect traders from negative balances, they can lead to significant losses in volatile markets if positions are closed automatically, especially if the market quickly reverses after the stop out. As such, using protective measures, like stop-loss orders and not over-leveraging, is always a good idea. Additionally, the specific percentage and the order in which positions are closed can vary among brokers, so day traders need to be aware of their broker's policy on stop-out levels.

How Do You Start Day Trading with the Best Brokers?

What to Consider When Choosing the Best Day Trading Platform?

When choosing a trading platform, you should consider a range of features that cater to both novice and seasoned traders. Here are some elements to keep in mind:

• Technical analysis tools: The platform should have robust technical indicators to help traders make informed decisions.

• Customization and user interface: Traders should be able to mold the platform according to their preferences, allowing them to set up their trading environment precisely how they want. We find that the products from the MetaTrader suite, especially MT4, offers excellent features for this purpose.

• Platform accessibility: A top-notch trading platform should offer flexibility in terms of access, whether it's web-based or a downloadable application.

• Risk-management tools: Trading inherently comes with risks, and a high-quality platform should provide instruments that allow traders to set stop-losses, take-profits, and other crucial order types.

• Performance and reliability: Beginner traders especially need a platform that operates seamlessly with minimal downtimes or glitches. This ensures a smooth trading journey, allowing them to focus on market movements rather than technical hiccups.

• Learning and educational resources: The best brokers will offer platforms that are not only intuitive, but also come with tutorials, guides, and responsive customer support to assist traders in navigating any challenges they might face.

To choose the perfect trading platform, here’s some advice:

• Determine your trading style and needs.

• Research different platforms and compare their features.

• Test the platforms with a demo account to see which one suits you best.

• Choose a platform that offers the features you need and is user-friendly.

• Ensure that the platform is reliable and has a good reputation in the industry.

Remember that the trading platform you choose can have a significant impact on your trading success, so it's important to choose wisely.

Available Assets and Instruments with Day Trading Brokers

The Bottom Line

Methodology

The team at Arincen collected over 120 pieces of data covering more than 100 licensed FOREX companies. Data collection was done in three ways:

1. Companies’ websites.

2. Other Websites that have ranked FOREX companies.

3. A survey questionnaire (referred to here as Survey “1”) was sent to the companies invited to participate in the exercise. 

We have identified 12 criteria for our assessment, each containing several aspects and carrying its relative weight. These include licensing, deposits and withdrawals, number of assets, day trading, etc. 

Afterwards, we validated the data by:

1. Registering with FOREX companies as a secret shopper and/or as Arincen.

2. Survey number “2,” in which we asked these companies’ customers for important feedback and experience. 

The next step saw us evaluate and rank each company, relying on the hard work of 15 Arincen employees. We were very careful in ensuring the most accurate assessment possible, including considering different languages, as well as the various mobile-app operating systems, e.g., Apple, Samsung etc.

To add credibility to our research project, we sent a third and final survey (referred to here as Survey “3”) to enable participating FOREX companies to evaluate our research and whether it accurately reflects the realities on the ground. We were fortunate enough to receive a mark of 9.9 out of 10! We have kept to a minimum the margin of error, which stood at a measly 1%. To learn more about how we came up with the evaluation, please click here.