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Novice traders would usually hire online brokers to execute day trading for them Online brokers, after all, are accessible and less expensive. All you need is a credit card and an internet connection to hire online brokers The only problem with online brokers is the inherent fact that order execution can become relatively slow through them. Speed is of the essence in trading. A trader should have a system that can order and place trades on the dot if he or she wants to succeed. Upon recognizing this fact, an experience trader would usually turn to direct access trading systems instead of ordering through online brokers. Direct access trading can make things a lot easier when you are getting into the stock market for beginners.
For professional day traders, success depends a lot on speed of execution. With direct access trading, trades do not need to pass through an online broker acting as a middleman Once the middleman is out of the picture, traders can save up to several minutes of their precious time. This is because direct access trading, as the term implies, allow traders to order directly from a client or a market maker who is actually working on the floor of the stock exchange. Traders can save time since the orders are no longer executed by online brokers. One you’ve mastered the stock market basics things get easier quickly, then you can move onto things like beginners forex trading.
It is also important to consider the fact that online brokers might also work directly for market makers. The tendency is that when executing orders, online brokers would not choose market makers that offer the best price. Instead, they would trade with their clients to earn commission. This acceptable practice in financial trading wherein brokers get commissions from executing orders to their market maker clients is known as “payment for order flow.” On the other hand, direct access trading ensures that trades are executed with the market maker that offers the best price.
Direct access trading is relatively more expensive to online brokers due to the probability that online brokers are receiving payment for order flow from the market maker which ensures hefty commission rates. Consequently, they can afford to offer rock-bottom rates to traders. Commissions obtain from direct access trading are based on the number of traders executed by a trader within a certain period. Commission rates for each trade may fall within $15 to $35. In addition, most direct access trading system providers would charge for the use of their software. This additional payment falls within $250 to $300 per month. Some firms waive the software fees if the trader makes a certain number of trades, most of the time falling within 50 to 300 per month.
There are several direct access trading systems available in the internet today. All of them differ in terms of speed and accuracy of order execution as well as the commission price that they charge for every trade. Professional traders have to be vigilant in choosing the perfect trading system based on these key factors.