Trading Platform

What Is a Trading Platform?

A trading platform is a software system used to trade securities. It allows investors to open, close, and manage market positions online through a financial intermediary, such as an online broker.

Online trading platforms are frequently offered by brokers either for free or at a discount in exchange for maintaining a funded account and/or making a specified number of trades per month. The best trading platforms offer a mix of robust features and low fees.

Key Takeaways

  • Trading platforms are software systems used to execute and manage market positions.
  • Trading platforms can offer an easy-to-use interface with basic order entry screens for beginning investors.
  • They can also offer more sophisticated tools such as real-time streaming quotes, advanced charting tools, live news feeds, educational resources, and access to proprietary research.
  • Traders and investors should consider fees and features when comparing trading platforms.
  • Interactive Brokers is rated highly as a trading platform/online broker for advanced traders.

Understanding Trading Platforms

A trading platform is a software system offered to investors and traders by certain financial institutions, such as brokerages and banks. Essentially, trading platforms enable investors and traders to place trades and monitor their accounts.

Often, trading platforms include other features that help investors make their investment decisions. These features can include real-time quotes, interactive charts, and a range of charting tools, streaming news feeds, and premium research. Platforms also may be tailored to specific markets, such as stocks, currencies, options, or futures markets.

There are two types of trading platforms: commercial platforms and proprietary platforms. Commercial platforms are designed for day traders and retail investors. They are characterized by ease of use and an assortment of helpful features, such as real-time quotes, international news feeds, live, interactive charts, educational content, and research tools.

On the other hand, proprietary platforms are customized platforms developed by large brokerages and other financial institutions for their own trading activities. These are not available to the public.

In 2020, Charles Schwab officially acquired TD Ameritrade for about $22 billion. The acquisition resulted in client assets valued at over $6 trillion and approximately 28 million brokerage accounts.

Special Considerations

Features

When choosing a trading platform, traders and investors should consider whether the features offered meet their trading needs. Day traders and other short-term traders may require features such as Level 2 quotes and access to market depth information such as price levels, order size, and volume to assist them in timing their orders.

They may need technical analysis tools such as live charts with a range of technical indicators. Options traders may need tools that are specifically designed to help them research, analyze, and test their trading strategies.

Fees

Fees are also important to consider when choosing a trading platform. For example, traders who employ scalping as a trading strategy will gravitate towards platforms with low fees. In general, lower fees are always preferable but there may be trade-offs to consider. For example, low fees may not be advantageous if they translate to fewer or less powerful features.

Provider

Some trading platforms aren't connected to a specific intermediary or broker. Conversely, other trading platforms are only available when you work with a particular intermediary or broker. As a result, investors should consider carefully the reputation of the intermediary or broker before committing to a specific trading platform to execute trades and manage their accounts. Be sure a provider stands solidly behind all that a platform offers.

Requirements

Finally, trading platforms may have specific requirements that must be met before you can open an account and/or trade. For example, day trading platforms may require that traders have at least $25,000 in equity in their accounts and be approved for margin trading. Options platforms may require that traders be approved to trade various types of options before they can use the trading platform.

Popular Trading Platforms

There are hundreds—if not thousands—of different trading platforms, including these four popular options:

  • Interactive Brokers: Interactive Brokers is the most popular trading platform for professionals, with low fees and access to markets around the world.
  • TradeStation: TradeStation is a popular trading platform for algorithmic traders who prefer to execute trading strategies using automated scripts developed with EasyLanguage.
  • TD Ameritrade: TD Ameritrade is a popular broker for both traders and investors, especially following its acquisition of thinkorswim.
  • Robinhood: Robinhood is a commission-free trading platform targeting millennials. It started off as a mobile app and now has a web interface as well. The platform makes money from several sources, from interest on cash in its accounts to selling order flow to large brokerages.

The most popular platform for many foreign exchange (forex) market participants is MetaTrader, which is a trading platform that interfaces with many different brokers. Its MQL scripting language has become a popular tool for those looking to automate their trading in currencies.

What's a Trading Platform?

Essentially, a trading platform is a software system typically offered through a brokerage or other financial institution that lets you trade online, on your own. A trading platform gives investors an online interface through which they can access various markets, place trades, monitor positions, and manage their accounts.

Trading platforms can offer a number of other features, as well. Broadly speaking, these include real-time quotes, live business and financial news feeds, instant access to a wealth of streaming and historical financial data, technical analysis tools, investment research, and educational resources.

Is There a Good Trading Platform for Beginning Traders?

E*Trade and TD Ameritrade are choices that beginners may want to look into. TD Ameritrade has excellent educational resources that can help novice traders understand the markets and become more comfortable with trading before actually placing trades. E*Trade's user-friendly interface can eliminate the frustrations a beginner might have trying to navigate a trading platform.

What Is a Day Trader?

A day trader is a trader who makes multiple trades in a single day, rarely (if ever) holding a position overnight. Day traders try to take advantage of intraday price movements and market inefficiencies to make money. They tend to use technical analysis to help them time their market entries and exits. Day trading requires focus, dedication, and discipline.

Article Sources
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  1. Nasdaq. "Schwab Closes TD Ameritrade Buyout, Creates a Broker Behemoth."

  2. Interactive Brokers. "Why IBKR."

  3. TradeStation. "Desktop Platform."

  4. TD Ameritrade. "thinkorswim Trading Platforms."

  5. Robinhood. "Investing for Everyone."

  6. Robinhood. "How Robinhood Makes Money."

  7. MetaTrader. "Company."

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