| Choosing the Right Broker, Decisions, Decisions…… Fast Execution or Regular ol’ Broker By Floyd Snyder, Publisher, Strictly Business Magazine Important Note: This story was written back in September of 1998. Much has changed and since then and the information here in may or may not be valid for current times and conditions. This article is based solely on my opinion and is not an attempt to tell you how you should trade or invest. I do suggest you consult professional advice before embarking on any business venture or investment/trading strategies. September 1998 --Picking the right broker could very likely be the most important decision you can make as a day trader. As more and more "newbies" enter the industry, one of the most common questions the old timers hear is, "What broker do you use?" The list of online brokers seems to get longer every day. This may have you thinking that making the right choice is that much more difficult when in reality it has become much easier. Along with the proliferation of brokers and day traders alike, it has become much more important that you consider one of the "fast execution" or "point and click" brokers if you intend to maximize your potential for profits as a professional day trader. This list is relatively small and most do a very good job. (We have included a list, with links to their web sites, of online brokers for your convince, both point & click and others. Trading stocks on the Internet has been around for a number of years and most of the biggest and most recognized online brokers do a very good job for their investment clients. But the fact is they were never designed to cater to or specialize in the day trading profession as we find it today. Most of the "standard" online brokers are designed for "investing". Not day trading! These services are built on old platforms with order entry systems that most professional day traders will tell you just won’t work for today’s fast paced action. Using a fast execution broker, it is not unusual to be in and out of a position in less than 15 seconds, with confirmations. With most standard brokers, it will take you much longer than that to get the order form filled out! If you are trading in a professional trading atmosphere, such as a trading room, the difference in your broker will many times make the difference between "doing" the scalping for a profit or "being" scalped for a loss. The traders with the fast “trigger" fingers will consistently make much more money. Those that try to compete using the slower systems have a much higher exposure to losses and shouldn’t even try to compete on the fast moving plays. There are still many reasons to use a standard broker. As a rule they will have lower commission, longer list of stocks for shorting, options trading, mutual funds, bulletin board stocks and many other products the day trading specialist may not have. A lot of new comers to the profession well often times make a decision on their broker based purely on the commission schedule or because some one else is using them. Wrong! In reality the commission structure for the active trader can become quit insignificant compared to profits. This obviously is depending on your trading goals and style. The advantages of the fast broker setups can pay any differences in fees for an entire year in one day!! Being penny wise and dollar poor is a common mistake that many new comers make. I recommend you look at as many brokers as you can before choosing. The last thing you want to do is chose a broker simply because it appears to be the most popular one. The most popular one may not suite your particular needs or style of trading. Your best course of action is to do your own research. Almost all online brokers have a web site and it’s probably a good place to start. Most of the "day trading specialist" have demo programs. Make sure you take advantage of these demos and ask as many questions as possible "before" you sign up. Remember that the only stupid question is the one that goes unasked. Make sure whichever broker you decide on has real time Level II, NASDAQ Quotes, charting, TOS (Time Of Sales), before and after hours trading, SOES, SelectNet, and at least two or more ECNs. (Electronic Communications Networks). Other considerations should include technical support and customer service. Unfortunately both are hard to evaluate till you need them. Obviously of the utmost important is reliability. The best broker in the world is of little value to you if they can’t keep their service on line. We have seen some brokers experiencing rapid growth rates beyond their capacity to serve the clients satisfactorily. We have also witnessed some brokers limiting the number of new clients, the theory being: do more business with fewer clients and give a higher level of quality service. There is a certain level of appeal to that concept. There are day traders out their trading and making money without the benefit of one of the "specialist broker". I’m not suggesting that it can’t be done. I am suggesting that it is much easier to do with the right tools. I believe in working smarter not harder. I would suggest that anyone with the skill and ability to make money with the average online broker could make a lot more money with the broker specializing in day trading. One of the questions you must ask of those that would suggest you can get it done the hard way is if they have even tried the point & click systems. Most, if not all would tell you they have not. Another question to ask is how many folks using the point & click would go back to the older systems. Very few if any would be my guess. You may have noticed that I have repeatedly referred to day trading as a profession. For the most successful players that is exactly what it has become. If you hope to make a living as a day trader, I strongly suggest you approach it as a professional. This is no place for amateurs or speculators hoping to "get rich quick" or pick up a few extra dollars. Things move fast and furiously and you have to have the right tools, as in any profession, to be competitive. With out them, you experience could be down right disastrous. Partial listing: Links to Point & Click, Real Time Broker's Specializing in day trading: MB Trading, Inc. CyBer Corp (CyBerTrader) RML Trading The EXECUTIONER Daytrading.net Trend Trader Level II Quotes Providers (All those above should include Lvl2 quotes): PC Quote Data Broadcast Corp (DBC)/eSignal Editors Note: This list is far from complete. I have made only a cursory pass at cleaning it up but there are many other’s offering service today that are not here. You may want to try this link for others: Broker Links Back To Home Page |
 |
 |
| TraderAide.com The Trader's Assistant |
 |
 |
| Recommended Reading: Books in addition to those above |