To be a good day trader you need skill, knowledge and the hardware to make your stock trades. The following is a list of some of the basic equipment you will need as a day trader.
A Good Computer: Be clear on what constitutes a good computer for trading. If you have a computer already and you can meet the other requirements outlined here, you’re probably okay to start out. That said: if you decide to keep going with your trades, at some point you will probably need to upgrade.
The guidelines your computer should meet:
· 1000MHZ with 512MB of Ram
· 100 Gigabyte hard drive
· High Quality Video Card
· Monitor of at least 17”
High Speed Internet Connection: In many respects, this is the most fundamental requirement to conduct your day trading. It’s absolutely paramount for day traders to get information fast across the internet. Look at what a day trader does. They hold on to stock anywhere from a few minutes to a few hours. You need to get fast order executions, confirmations of trades and delivery of news, quotes, and other market data. For this, a 56K modem dial-up connection is barely adequate. You really need either a cable model or a DSL phone line. As you can generally get good plans for phone, internet, and cable, you don’t end up paying too much nowadays: about $15-$20/month for dial-up, $30-$50/month for either cable or DSL are well worth the investment.
Access to Real Time Data: There are numerous firms who can supply you with real-time online market data. You need a subscription to a real time service to get real-time information on the following:
· Stock quotes and ticker
· Market averages and indices
· Market news stories
· NASDAQ Level II screens
· Charting
· Price and news alerts
Real-time data subscriptions 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 a good data feed service.
Online Order Executions: Finally, you’re going to need some way to process purchasing and sales orders online. The process you need is an online order execution system of which, for day traders, there are two basic types. The first type of service is offered by online discount brokers such as E*trade or Waterhouse Securities. An online brokerage is by far the most commonly used online trading service. The second type of service is known as Electronic Direct Access Trading, or EDAT for short. This will connect the customer directly to the appropriate exchange, usually through a modem or dedicated phone line.
The only thing to be aware of when choosing between a traditional online brokerage and an EDAT is that online brokerages may operate too slowly to accommodate active day trading. An EDAT system allows you to place an order directly into the market resulting in much quicker order executions and confirmations than regular internet broker.
Business at High Speed: Real Time Data
The reason you need both a fast computer and a fast internet connection to be a day trader: you need access to real time data. What was a good day trade five minutes ago may not be a good trade now; what was a good trade five seconds ago may not be a good trade now.
Slow computers and slow internet connections create costly problems for day traders. You need access to real-time market data to make your trades.
Your monthly overheads are generally between about $400 and $500 realistically; that’s if you really want to make some money with your trading. Of course, you can start out slow and work your way up to better services to manage the cost. You’ll get to decide whether paying more for a service turns out to be worthwhile. If you have a knack for trading, it probably will.
