Novice traders would usually hire online brokers to execute day trading for them Online brokers, after all, are accessible and less expensive. Anyone with an internet connection and a credit card can acquire one. The only problem with online brokers is the inherent fact that order execution can become relatively slow through them. Speed is important in trading. To ensure success, traders should utilize a system that orders and places trades on time. 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.
Immediate execution of orders is the key factor for day trading success. With direct access trading, trades do not need to pass through an online broker acting as a middleman The absence of this middleman can save time—from several seconds to several minutes. Direct access trading allows traders to execute orders directly with the market makers working on the floor. This allows immediate execution since orders need not pass through 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. They would rather route the trades to their clients to earn rebates. This is a practice termed as “payment for order flow” wherein online brokers earn rebates from routing trades to a certain market maker. With direct access trading, the trader can choose the market maker that provides 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. On the other hand, commissions from direct access traders are scaled depending on the number of trades a trader execute for a specific time period. The fees for every trade may range from $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.