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Base  Articles

Equipment needed for daytrading

This article describes the basic equipment and services required by serious day traders to enable them to put together an adequate platform for online day trading. It is crucial for an active day trader to spend the money necessary to create a solid trading platform in order to compete on the same level with other day traders.

1. Minimum Hardware Requirements 

The only items of hardware that you require to trade online are a properly configured computer and a monitor. In this regard, a 2GHz computer with 512MB of RAM, a 100 Gigabyte hard drive and a high quality video card is adequate, but the higher the processor speed the better. The monitor should be at least 17″, and preferably larger. Depending on the type of online connection you choose, the computer should be equipped with either a 56K modem or (preferably) a high speed network card with a cable or DSL modem. Based on current prices, an outlay of about $1500 for the basic hardware items outlined above should be sufficient to get you started.

2. Connection Speed 

Online connection speed is a very important consideration for active day traders who need fast order executions, confirmations of trades and delivery of news, quotes and other market data. A 56K modem dial-up connection is barely adequate for the less active trader. For the active day trader, a cable modem connection or an DSL phone line connection is highly recommended. Expect to pay about $20 a month for regular dial-up Internet service and between $30 – $50 a month for a cable or DSL phone connection.

3. Real Time Data 

In order to successfully day trade you must have access to real-time market data. Relying on stale information will result in poor trades. There are numerous firms who can supply you with real-time online market data. You may find links to some of the leading suppliers here. Prices for real-time data vary widely depending on the supplier and the quantity or type of data you want. Expect to pay about $75 to $300 (or more) a month for an adequate data feed service.

4. Online Order Execution 

There are two basic types of online order execution services available to day traders and other investors. The first type of service is offered by Internet based online discount brokers. This is by far the most commonly used type of online trading service. The second type of service is provided through online systems that link the customer directly to the relevant exchange through a modem or dedicated phone line. These systems are generally referred to as Electronic Direct Access Trading (EDAT). Internet based discount brokers vary in how they execute customer orders and the length of time it takes them to review, execute or confirm trade orders. Some firms choose to route certain orders to another broker or third party for execution. This can delay the time it takes to complete a trade. Also, few of these brokers offer to route orders to an Electronic Communications Network (ECN) where the price may be better. Consequently, for active day traders who want instant confirmations, and direct access to exchanges and ECNs, an EDAT system is preferable to trading through a traditional Web based online broker, even though commission rates and other fees may be higher. An EDAT system permits a trader to place an order directly into the market resulting in much quicker order executions and confirmations than is generally the case with Internet based discount brokers and often at better prices.

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