What Is a Trading Platform?

A trading platform is a software application used for trading securities. It enables investors to open, close, and manage market positions online via a financial intermediary, such as an online broker. Brokers often provide trading platforms for free or at a reduced cost in exchange for maintaining a funded account and/or executing a certain number of trades per month. The top trading platforms combine robust features with low fees.

Understanding Trading Platforms

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

Investors can use trading platforms to open various types of accounts, including margin accounts, cash accounts, retirement accounts, and self-directed accounts. Through these accounts, traders can place buy and sell orders for stocks, bonds, exchange-traded funds (ETFs), mutual funds, and more.

Trading platforms often come with additional features to assist investors in making informed decisions. These features may include real-time quotes, interactive charts with various charting tools, streaming news feeds, and premium research. Some platforms are specifically tailored to certain markets, such as stocks, currencies, options, or futures.

Types of Trading Platforms

There are two main types of trading platforms: commercial and proprietary.

1. Commercial Platforms: Designed for a wide range of investors, including day traders and retail investors, these platforms are user-friendly and offer features such as real-time quotes, international news feeds, live interactive charts, educational content, and research tools. Many well-known trading sites fall into this category.

2. Proprietary Platforms: Developed and customized by large brokerages and financial institutions for their own use, proprietary platforms provide direct market access, offering a competitive advantage. These platforms are tailored for institutional use and are not available to the general public.

What to Look for in a Trading Platform

Features

When selecting a trading platform, traders and investors should evaluate whether the offered features align with their trading needs. Day traders and other short-term traders may require tools like Level 2 quotes and detailed market information, such as price levels, order size, and volume, to help them time their trades effectively.

Technical analysis tools, including live charts with various technical indicators, are essential for many traders. Options traders might need specialized tools to research, analyze, and test their trading strategies.

Fees

Fees are a crucial consideration when choosing a trading platform. Traders using scalping strategies, for example, will prefer platforms with low fees. While lower fees are generally desirable, there may be trade-offs, such as fewer or less powerful features, to consider.

Provider

Some trading platforms are independent of specific intermediaries or brokers, while others are exclusive to particular brokers. Therefore, investors should carefully assess the reputation of the intermediary or broker before committing to a trading platform for executing trades and managing their accounts. Ensure that the provider reliably supports all the platform’s features.

Requirements

Trading platforms may have specific requirements for account opening and trading. For instance, day trading platforms might require traders to maintain at least $25,000 in equity in their accounts and be approved for margin trading. Options platforms may necessitate approval for trading various types of options before traders can use the platform.

What Is a Day Trader?

A day trader is someone who makes multiple trades within a single day, rarely holding positions overnight. Day traders aim to profit from intraday price movements and market inefficiencies. They often rely on technical analysis to time their market entries and exits. Day trading demands focus, dedication, and discipline.

The Bottom Line

Trading platforms facilitate investing by providing easy access to markets and tools. These platforms are typically online, allowing individuals to invest independently or with professional guidance. Selecting the right trading platform depends on your capital, needs, goals, and experience. Ensure you thoroughly research and evaluate options before committing to one.