Choosing a Trading Platform that Fits Your Needs

[This article is geared primarily to those trading the US markets.] Placing stock, options and futures trades has never been easier and cheaper. The days of calling your broker on the phone to place a trade are ancient history for most traders. All the major brokerage firms have trading platforms that allow you to easily place orders on the US exchanges.

With so many trading platforms out there, it can be hard to know which one is best for you. The short answer is that it depends on your style of trading and requirements.

Here are the main factors in choosing a trading platform:

1. Cost
2. Reliability
3. Support
4. Tools
5. Your trading style

Trading Cost

Most brokerage firms charge zero commissions on stock trades and small commissions and fees on options and futures trades. The few that do still charge commissions for stock trades have very low rates that are usually flat — not a percentage of the transaction. If you’re primarily a stock trader, then cost is no issue.

Everyone charges either commissions or fees on options trades, and those costs are also relatively low  — usually somewhere between 6o cents and a dollar — depending on the broker (some might be slightly higher). If you’re an active options trader and trade a large number of contracts, you might be able to negotiate lower prices with your broker. For most traders, the dollar (or less) of fees per contract shouldn’t have a material effect on your profit or loss statement. If it does, you probably need to review your trading strategy and position sizing.

Commissions and fees on futures trading are usually slightly higher than for options trades, on most major brokerage trading platforms. We’re still only talking about a few bucks per contract and half that for micro contracts (which are 1 tenth the size of regular mini contracts). But if you’re actively trying to scalp the micro contracts, those fees can add up quickly. If you’re many money on every trade, the fees are not an issue. If you’re losing, you still pay the fees, and that’s when those fees can start chipping away at your account in a significant way.

Let’s say you’re using TD Ameritrade, which charges $2.25 per micro e-mini contract each way, or $4.50 per round trip trade. And say  you scalped 1 contract of the micro e-minis 20 times in a day and you ended up breaking even on your P&L. Guess what? When you check your account balance the next morning you’ll notice that it’s lower by $90. If you traded 2 contract, you’re down $180. You get the idea. For a new trader with a relatively small account getting acquainted with futures, this fee attrition could be painful. And that’s if you’re breaking even. If you’re adding losses to your fees, then your drawdown starts to get fatal.

Therefore, if you want to trade futures you should search for a broker with the lowest fees per contract, to mitigate the steady hit to your account, whether you’re winning or losing.

Reliability

First of all, you want to make sure you’re using a reputable broker. The last thing you want is to turn on CNBC and find out that your broker has been shut down, gone out of business or is under SEC investigation — and your money is MIA. When in doubt, go with the familiar names who you know will be there for the long run.

The other part of reliability relates to the trading platform. You want a platform that won’t go down on you no matter how busy the market is. It’s those crazy high volume days that often present to greatest trading opportunities, so you don’t want to be left out because your trading platform is moving slowing or freezing every few minutes. Even the best technology has its limitations, and there are always exceptional cases when that technology fails. But if a platform fails you more than a few times, it’s time to find a replacement. Test out a platform with a paper trading account, which most brokers provide, until you find the one that you think works best for you.

Support

In those hopefully rare occasions when you have a problem with your trading platform or if you have a question about using it, you want to be able to get the support you need, quickly.  And you want there to be a real person on the other end of the support call or chat, who can communicate with you and answer your questions, in English that you can understand. Before you choose a platform see if they have customer support and contact them with a question or two to see if they pass your test.

Tools

Unless your trading or investing strategy is based solely on following recommendations, you’ll need ways to research your potential market moves. If you use fundamentals you’ll want to look at company financials, analyst reports and related news stories. For technical analysis you’ll need to look at charts along with moving averages, indicators and other technically based charting studies.

All of this information and data, fundamental and technical, is available on many different free online sites (finviz.com, chartmill.com, tradingview.com etc).  So you don’t necessarily need your broker platform to have these capabilities — you can do your research and charting on one of these platforms, and then place your actual trades on your broker’s website, app or platform.

One drawback to this method is that you won’t be able to trade directly off of a chart. An other is that it’s always easier to work in one place as opposed to doing different tasks on different sites and platforms.

Ideally, you want to find one platform that has all the tools you’ll need to trade in — but not everything in life is ideal.

Your trading style

Your trading style is ultimately the most important factor in choosing a trading platform.

If you are a buy and hold investor or a swing trader, you can probably successfully use any of the major reputable broker sites or platforms to place your trades, while doing your research on other sites is necessary.

If you are an active intraday trader, then you’ll want to find a platform geared towards speed and favorable execution.

If you like trading from your phone, make sure to choose a broker with a robust mobile app.

I personally have found that the TD Ameritrade desktop platform ThinkorSwim has awesome charting capabilities, which is why I use it for my stock and options trading. I also prefer trading directly from a chart, which TOS allows me to do. For futures trading I chart on ThinkorSwim (because I find TOS charting to be superior) and place my trades on Tradestation, because their commissions are significantly cheaper. I’d rather just be able to chart on Tradestation too, but I didn’t find their charting tools satisfactory for my purposes. When I need to research fundamentals or to screen stocks, I usually use finviz.com and chartmill.com.

At the end of the day, it’s important to find a trading platform you like and that fits your needs – – and there are plenty of good choices. But your trading platform won’t make you money. That’s up to you.