Best 5 Day Trading Brokers 2023: Regulation, Fees, Spreads, Trading Instruments & More

Summary

There is a common misconception that only seasoned professionals can day trade. That was true some years ago. However, thanks to modern technology and brokers, beginners can learn the basics of day trading and be successful in it. 

We have taken our time to do the research and find out everything a beginner day trader needs to know about day trading. We will discuss not only the best day trading brokers available but also the basics of day trading, trading instruments, day trading leverage, and spreads. In addition, we will look at how to open an account on a day trading broker and the different payment methods available to deposit your capital. 

Finally, we will check online reviews about these brokers. This will give you an insight into the best ones to select. 

What are Day Trading Brokers?

A day trading broker is a broker that offers traders the option of buying and selling securities within the same day. These brokers help day traders place trades on trading platforms quickly. This way, traders can take advantage of rapid changes in the market. They also offer you good leverage to increase your exposure to more trading volume. There are brokers that allow day trading on some accounts but don’t allow it on some other accounts. 

Day trading brokers are often regulated by financial regulatory bodies within the region where they offer their services. For example, if you are day trading with a broker in Australia, then the Australian Securities and Investments Commission (ASIC) is the body responsible for regulating the broker. There are also unregulated brokers for day trading who offer higher leverages and other benefits some traders may be interested in but can’t get due to regulations in their region. These unregulated brokers are dangerous, and day traders are exposed to high risk by trading with the wrong ones.       

Pros and Cons of Day Trading Brokers

Benefits of Day Trading Brokers

The best online brokers can give enormous benefits that make day trading worth it. Some benefits you get when you day trade with a day trading broker are:

Access to Leverage

Leverage is a term used to describe traders borrowing funds to hold more positions in the financial market. To trade with leverage, a trader needs to meet an initial margin requirement, meaning they need to pay a percentage of a large amount of money for a trade. For example, if you plan to trade a standard lot in forex (100,000 pieces of a currency) at a 1:50 leverage, you need 2% of 100,000, or $2,000. If you deposit $2,000 on a 1:50 leverage, you can trade positions worth $100,000. Day trading brokers give traders access to leverage. 

Access to Educational Resources

Day trading can be daunting if you are a beginner. You need to learn about securities, leverages, spreads, etc. Good brokers for beginners offer educational resources that teach them the basics of trading and the various trading instruments available. These resources will show you how to place a trade, do fundamental and technical market analysis, withdraw and deposit funds in the account, and so much more. 

Ease and Speed of Trading

Before online brokers came into existence, only people who worked for trading houses and large financial corporations could access the market and trade. Today, thanks to online brokers, anybody with a smartphone and an internet connection can access any financial market and place their trades. In addition, the best online day trading brokers are very fast and precise, so you can act on real-time information and changes.  

Monitor Your Investment in Real-Time

As a day trader, you make most of your investment decisions in real time. This means you always need to keep an eye on all your investment every second of the day. These brokers provide information about all your trading investments, so you can monitor them in real-time.

Access to Low-Cost Trading

They offer low spreads and reduced fees that allow you to trade. The best Online forex brokers have fees, but they are considerably lower than traditional brokerage firms.

Factors to Consider When Choosing Your Day Trading Broker

Day trading involves a lot of skill, precision, sound analysis, and a fundamental understanding of trading. It also requires the right tools, meaning you must trade with brokers that make your trading process seamless. To choose the right broker for day trading, there are several factors you must consider. Most of these requirements are obvious, but some of them aren’t. 

Here are some factors to consider before you choose a day trading broker:

Regulations

Every day, investors and traders exchange trillions of dollars on the financial market. Without proper regulation, most of these funds would fall into the wrong hands. Regulatory bodies set and enforce rules for brokers so that investors can trust them enough to trade their money through them.

All day trading brokers you want to work with should have at least one regulatory body in your region regulating their activities. Many regulatory bodies require these brokers to save some funds in a tier 1 bank. These funds act as insurance for the traders in case the broker goes bankrupt.     

Some regulatory bodies also have laws that protect traders’ personal data and require that brokers should have certain security technologies in place to prevent hacking. 

Education

Day trading is often riskier than many other trading practices, so you must be skilled before you delve into it. Choosing a broker with excellent educational resources is a good way to build up your skill in day trading. If you are a beginner, you should select good brokers for beginners like Fidelity and TradeStation.

Good brokers for beginners offer educational resources like tutorial videos, courses, webinars, etc. When you follow through with these resources with dedication, you have the chance to become a skilled day trader in no time. So, consider brokers with good educational resources before you start trading. 

Fees and Commissions

All-day trading brokers charge fees and commissions for offering trading services. Ideally, you should try to find the ones with fees and commissions that aren’t too burdensome on you since it is impossible to find a broker with none. The most common fee traders pay when using brokers is spread, which is the difference between the ask and bid price of securities. 

Other fees brokers charge for day trading are:

• Deposit & Withdrawal fees: Charges on your capital for depositing and withdrawing money from your trading account
• Inactivity fee: Charges collected for inactivity in your account after some months

Tradable Instruments

Trading instruments are markets you can trade on a day trading platform. You should be able to trade in most or all financial markets in any day trading brokerage platform. Examples of trading instruments are stocks, cryptocurrencies, forex, ETFs, indices, etc. The more trading instruments a day trading broker has, the better. 

Apart from having a variety of tradable instruments, a day trading broker should also offer multiple assets in each security type. For instance, a robust day trading broker would offer multiple forex pairs, stocks, indices, etc. Look for day trading platforms with the most tradable instruments.

Leverage

Leverage is essential in day trading as it allows you to increase your exposure and open positions you normally wouldn’t be able to open with your capital alone. This means you can trade more stocks, forex pairs, etc., than usual and increase your position size. Some brokers have a cap on the maximum leverage they can offer because of regulations in their region. You must be careful, however, since losses could be very severe when trading with leverages.  

Trading Platforms

Trading platforms are pieces of software brokers use to place trades in a financial market. A day trading broker with a terrible platform could mean your transactions aren’t placed on time, which means bad execution. The major trading platforms are MT4, MT5, and cTrader. Apart from these trading platforms, some brokers have their own proprietary trading platforms, for example, the eToro broker trading software. 

Some brokers offer one or multiple platforms depending on their users’ requirements. Each platform has its own set of advantages and disadvantages that makes it unique to different types of traders. When considering a day trading broker, research them to see if they use the trading platform that works for you before you trade with them.

User Experience

Many people overlook this factor, but it is equally as important as others. A day trading broker with a good user experience is easy to use, with essential information easily accessible. Their apps and websites are fully responsive, and they have dashboards that are easy to navigate. You can quickly contact their support to help you if you have any issues. All these features make a day trading broker a better choice than others.  

Customer Service

Most traders, beginners or professionals, will have times of difficulty when day trading. Sometimes, you may not find an option you need, and other times, you may see error messages you don’t understand. Good customer service can help you deal with these issues quickly and make your day trading experience smoother. Therefore, a day trading broker should have a quick and responsive customer service team to deal with problems. If a broker doesn’t have this, it isn’t worth considering. 

How to Get Started with a Day Trading Broker

After you have chosen a suitable day trading broker, it’s time to start trading. Before you can do this, you need to open an account with the broker. Here are some steps to follow before you can start trading with a day trading broker:

Step 1: Open an Account and Verify Your Identity With a Day Trading Broker

The first step you must take is to open an account with the day trading broker you have chosen. Click on the “Create Account” or “Open Account” button on the broker’s website to open an account. 

You will be transferred to a page where you will fill in a few important details, like your email address, username, password, and country of residence. After you fill this information in, they will send you an email confirmation to your email address. Go to your email address to complete this.

When you confirm your email address, you will be allowed access to your account. You can only use a demo account at this stage since you haven’t verified your identity.  To verify your identity, you must provide the broker with your detailed information, proof of identity, and proof of address. 

You will be required to fill in detailed information like your name, country of residence, address, postal code, contact details, nature of your employment, social security number (where applicable), etc. After providing these details, the broker will ask for proof of identity and address.

• Proof of Identity: Proof of identity is a document that shows that you are who you say you are. It must contain your full name, date of birth, and photograph. It must also be issued by the government of your country or region. Examples of proof of identity documents are a driver’s licence and an international passport.
• Proof of Address: A proof of address document shows the broker that you live in a stated address and region. It must contain your address and be dated within the last three months. Bank statements and utility bills work perfectly for this purpose. 

Step 2: Deposit Funds

After verifying your identity, you need to deposit funds in your trading account before you can start trading. Different brokers have different minimum trading amount requirements. Also, they have different payment methods for depositing funds into your account. Some of these payment methods include debit/credit cards, local bank transfers, bank wire transfers and digital wallets like PayPal. 

Step 3: Start Day Trading

After depositing funds into your account and confirming the funds in your trading account, you can start day trading immediately. To do this, select the instrument you wish to trade. You can also trade with leverage depending on the options available in your region.

What Instruments Can You Day Trade?

As a day trader, you can trade different kinds of financial instruments. A financial instrument is a tradeable asset you exchange in a financial market. All financial instruments are tradeable in their respective markets. Some common financial instruments you can day trade are:

Forex Day Trading

Forex is a short version of “foreign exchange,” which refers to the market where people trade currencies. Forex traders exchange over $6 trillion worth of currencies daily in the forex market. To day trade currency pairs, you need to understand the basics of forex trading.

A forex pair is a pair of two currencies, with the price of one quoted against the other. For example, in the USD/JPY (US Dollar/ Japanese Yen) forex pair, the base currency is the USD, while the quote or counter currency is the JPY. This pair shows the number of JPY available for one USD.   

Day trading forex means you buy and sell currencies in dozens of trades daily. You can either go long or short, depending on your analysis. You can also use leverage when trading forex to increase your buying power.

Shares and Stocks Day Trading

Shares and stocks mean the same thing, depending on your personal preference. A share is a financial instrument used to represent a percentage of ownership in a publicly traded company. If you buy an Apple share, it means you own a small percentage of Apple. Investors like to day trade stocks in order to partake in the rapid fluctuations of their prices. For example, a day trader might learn of some news that could drive the value of a company’s shares in a couple of hours, so they would go long on those shares with the hope of selling them after they have increased in value. 

While regular investors may decide to buy and hold shares they believe will appreciate in the long term, day traders can go long and short on kinds of shares. 

There are different stocks available for trading on different stock exchanges. Day trading brokers offer access to multiple exchanges, so you can day trade thousands of stocks daily. Some common stock exchanges you can trade on include New York Stock Exchange (NYSE), London Stock Exchange, NASDAQ, Australian Securities Exchange, and so on.

ETFs Day Trading

ETFs is an acronym for Exchange Traded Funds. It is a financial instrument that acts as a basket of securities like bonds and stocks. Pooling investors’ money into an ETF provides diversification and balances risk for investors. A day trading broker allows you to trade ETFs on its platform. ETFs move in the direction of stock market indexes, like the S&P 500, giving day traders a chance to trade on their volatility.

Crypto Day Trading

Crypto is short for “Cryptocurrencies”, a group of decentralised currencies not under any central bank or government authority. Cryptocurrencies are some of the most volatile financial instruments, making them good for day trading. Most cryptocurrencies are open source, and news and information about them are widely accessible online, so day traders can easily use fundamental and technical analysis to determine the direction of cryptocurrencies and trade in that direction. 

Due to the extreme volatility of cryptocurrencies, most regions have put a limit on the amount of a day trading broker’s leverage offering to day traders. 

Indices Day Trading

Indices are financial instruments that track the performance of markets, groups of assets, or market segments. Common indices include the S&P 500, FTSE 100, and the Dow Jones Industrial Average. You can day trade these indices on day trading brokers by buying and selling them within the same day.

Commodities Day Trading

Commodities are financial instruments used to trade goods like oil, meat, soybean, etc., in a financial market. With commodities, you can own goods without needing storage for them. People often day trade commodities when they believe the price volatility can act in their favour. You can day-trade commodities with leverages on a day-trading broker, depending on the restrictions in your country/region.

Platforms Available on Day Trading Brokers

The job of a day trading broker is to connect you to a trading platform where your trades are placed directly on the financial market. A day trading platform is a piece of computer software that helps day traders place their transactions on a financial market. Generally, there are two major kinds of day trading platforms:

Desktop Trading Platform

A desktop trading platform is a computer software used by day trading brokers to place trades in the financial market when using a desktop or personal computer. Many brokers today have their own proprietary trading platforms, i.e., personalised trading software for just their clients. Proprietary trading platforms can be easily customised, so some traders prefer them to other common desktop trading platforms like MT4, MT5, and cTrader. Each one of these common platforms has features that differ from the other, so one platform may be favourable to one type of day trader and terrible to another. However, with proprietary platforms, you can adjust and get the best of all.

Still, if you prefer having MT4, MT5, or cTrader, some of the top CFD brokers offer all three options, along with their proprietary trading platform.              

Mobile Apps

Thanks to technology, brokers can offer day trading platforms to smartphone users using mobile apps. Just like with desktop devices, proprietary trading platforms are available on mobile devices. Many brokers offer their own proprietary platforms on mobile apps, along with the common trading platforms – MT4, MT5, and cTrader. This way, users can choose which platform they prefer and use it to trade through the broker.

Smartphone users can place trades, read real-time news and get notifications on their mobile device while day trading from any location. Brokers with proprietary platforms can offer their mobile trading app with the same quality as that on desktops.

What Type of Accounts Do Day Trading Brokers Offer?

After choosing a day trading broker and registering an account with them, you have to choose the type of account you want to trade. Some account types you can choose are:

Standard Day Trading Account

A standard day trading account is a regular account and most likely the account you’ll choose. These kinds of accounts have spreads and zero commission. As explained earlier, a spread is a difference between the bid and the asking price of a security. Try to find brokers with tight spreads when choosing this kind of account. 

Raw Day Trading Account

This kind of day trading account has zero spreads, but brokers often charge some commission for their services. Brokers who offer this account do not add any markup to the prices of their securities, so they don’t make any money from spreads. The only way they can make money is by charging traders commissions. 

Professional traders prefer trading with raw (or zero spread) day trading accounts. Most expert traders believe that zero-spread accounts are good for scalping, a common-day trading strategy.

MT4 Day Trading Account

As mentioned earlier, MT4 is a trading platform brokers use to place trades on the financial market. If a broker offers multiple trading platforms, interested day traders can choose the MT4 day trading account if they want. Some people prefer MT4 to MT5 because it is less complex, making it a good option for beginner-day traders. If you are one of these traders, choose a broker that offers multiple platform options and select the MT4 day trading account.

MT5 Day Trading Account

Alternatively, you can choose the MT5 day trading account if you are a trader interested in more complex operations. With an MT5 day trading account, you can trade futures and options, securities that are unavailable on the MT4 day trading platform. An MT5 account also complies with some financial regulations in the United States, like the First In, First Out (FIFO) rule by the National Futures Association (NFA). 

Demo Day Trading Account

If Just started day trading with a broker and don’t know your way around the platform, you can start with a demo account. As the name implies, a demo account is an account that beginner traders use to understand or get a feel of the market before they start using a real account. 

Most day trading brokers offer demo accounts to you after you sign up, even without verifying your identity. Every demo account has virtual funds, ranging from $5,000 to $100,000 or more, depending on the broker. Some brokers have flexible demo accounts, meaning you can trade with any amount of virtual money you wish to trade with. Demo day trading accounts are good for learning how to day trade without taking any risk. 

Onshore and Offshore Day Trading Brokers

When choosing a day trading broker, it is important you check if it has an onshore or offshore trading licence. An onshore licence allows a day trading broker to offer services to investors within a regulated region. For example, if a day trading broker gets an onshore licence from the Australian Securities and Investment Commission (ASIC), they can offer day trading services to residents in Australia. To have a licence to operate in a region, the broker needs to meet the requirements of the regulatory body in that region.

On the other hand, an offshore licence allows a broker to offer services to investors in multiple regions at the same time without meeting the requirements of the regulatory bodies in that region. Some brokers get offshore licences to avoid restrictions on leverage in the region where they plan to offer their services. For instance, a broker can get an offshore licence to offer more leverage than the maximum limit set by the ASIC in Australia. 

Onshore day trading brokers are safer to trade with because they are regulated by trustworthy bodies. Offshore brokers are not as safe because they circumvent many important regulations and restrictions that safeguard investors’ funds and data.

What are the Risks Associated with Day Trading?

There are many risks associated with day trading, so if you want to start as a day trader, you should be very careful. Here are some major risks day traders face regularly:

Financial Loss

Most day traders lose a lot of money when they start trading, and many of them never reach the point where they make up for their loss. Even professional day traders suffer heavy financial losses, so you must be emotionally and psychologically prepared to deal with this.

Severe Stress and Exhaustion

Day trading is a heavily demanding profession that requires traders to make minute-by-minute decisions. This requires great concentration and could lead to severe stress and exhaustion.

Using Leverage Could Backfire

Most day traders rely on leverage to make the most out of their strategies. This could be disadvantageous in the event of a huge loss. Traders could lose all their capital or worse, fall into debt.

Before you start day trading, compare all the risks with the potential upsides. Don’t believe any false claims of instant profits. 

How Much Do I Need to Start Day Trading?

Day trading often requires more capital to trade with than regular investing, which creates room for flexibility and losses. Most day trading brokers all over the world have little or no minimum deposit requirements, so you can start with however much you like. However,  it is recommended that you start day trading with an amount of money you are willing to risk. Don’t trade with more than you can afford to lose. 

If you are in the US or use a US-based day trading broker, the required legal minimum to day trade stock is $25,000. If you have less than that amount, you would be considered a Pattern Day Trader (PDT), and you will be restricted to trade for only 3 days in every 5 consecutive days. However, if you live outside the USA and use brokers like Interactive Brokers and TradeZero, you might be exempted from this SEC regulation, depending on the regulation in your region.

Day Trading vs Swing Trading

Day and swing trading are both active and short-term trading methods. You can trade securities quickly to take advantage of rapid price fluctuations in the market in any of the methods. The major difference between them is their time frame. As the name implies, all-day trading is done and completed within a 24-hour period, i.e. before the closing bell rings. On the other hand, swing trading is done within a few days or weeks.

Day traders execute a large volume of trades in an attempt to capitalise on short-term price movements, while swing traders use technical analysis to predict larger price movements. You can choose either of the two depending on your preference and understanding of the market.

Can I Day Trade Mutual Funds?

A mutual fund is a pooled investment security that takes money from traders for investment in other securities, like stocks and bonds. It isn’t possible to day trade mutual funds because they aren’t traded during the day. Mutual funds are traded only once a day, at the close of the market. Traders interested in day trading should focus on other securities they can trade multiple times during the day, like forex, stocks, commodities, indices, etc.

Are Day Trading Brokers Safe?

Regulated Brokers are safe because they take many safety measures to protect traders’ funds and personal information. To start with, regulated brokers are required to have a specific amount of money in a tier 1 bank as insurance in case of bankruptcy. Brokers cannot do any business with this money since its only purpose is to serve as a cushion for investors if the broker loses money.

Furthermore, brokers are required to keep traders’ personal information confidential. They cannot release personal information to a third-party unless required by the regulatory body to do so. Brokers must also use high-level technology to prevent hackers from accessing personal information.

In addition, they must also have negative balance protection, which prevents day traders from running into debt when they trade with leverage. With negative balance protection, you can never lose more than your capital balance. 

Online Reviews About Day Trading Brokers

Reddit

A lot of Reddit users had a lot to say about what factors they thought were important in selecting a day trading broker and the brokers they thought were the best. Some Redditors wanted brokers that provided them with cheap trading fees and good support, like Interactive Brokers.

Another Redditor mentioned that Robinhood was not good for day trading and that ET Trade only allowed a limited amount of day trades in a day. 

One Redditor mentioned Binance as the most popular day trading broker for cryptocurrencies. This makes sense as Binance is robust, contains numerous cryptocurrencies and is good for beginners.

Quora

We also visited Quora, another social platform with millions of users who share their opinions about various subjects. Many users had their opinions on factors to look out for when selecting good brokers. One user advised beginners to use brokers with good demo accounts so that they can learn about the broker’s functionality before they dive in further.

Another user gave a myriad of factors to look out for, like low commissions, resources, option analytics, good trading platform, data fees, etc. Then he mentioned Ameritrade as a good option for traders who want all these factors. 

People also mentioned brokers like Hugosway for high leverages, Pepperstone for their good trading platform, and Oanda for swing trading.

Bottom Line

Day trading is a common method traders use to take advantage of price fluctuations in financial markets. The choice of broker for day trading is important as it could mean a smoother experience for you. When choosing a day trading broker, consider its safety, the number of securities it offers, customer support, and whether it is regulated. 

You can day trade a number of securities on day trading brokers, like shares, commodities, currencies, cryptocurrencies, and ETFs. To get started with a day trading broker, you need to set up an account and verify your identity with proof of identity and proof of address documents. When you are done with this process, you can choose any kind of account you want. Different account types include raw account, demo account, MT4 account, and MT5 account.

When choosing a day trading broker, check to confirm that they are registered or not. Registered brokers are called onshore brokers and are safer than unregistered brokers or offshore brokers. Also, study all the risks involved in day trading, including the financial, emotional, and psychological risks, before you decide to plunge into it. Traders cannot day trade mutual funds, so exclude them from your plan if you want to build a successful day trading career.