What is the cheapest way to day trade in the stock market?

nomi king 6 months 1 Answer 101 views

Answer ( 1 )

  1. The cheapest way to day trade the stock market is through RobinHood, at least if you’re defining ‘cheap’ as not having upfront per-transaction fees. They do take their cut like any company, just not the usual way.

    RobinHood sells the ‘order flow’ information to a company that uses the information of who is buying or selling what to front run you for a penny or two on the bid-ask spread. This basically works out to be the same long term cost depending on your strategy.

    There is another way of answering this too; a single Day Trade is defined as buying and then selling the same stock on the same day. If you have less than $25,000 in your account then you only get 3 Day Trades in a five-day rolling period. However, you can get around this somewhat by using stock options.

    If for example I buy a Call option on SPY, an ETF resembling the S&P500 index, and try to sell that call option the same day, that’s a Day Trade. If instead of reselling that option, I pick the next strike right above it and sell that, it creates a Debit Spread which locks in a limited risk from that point forward. So if you made a profit on buying the call, you can lock that in without having to wait a whole day to capture the profit, as often waiting that day kills much of what you hoped to gain.

    You do have to qualify for options though, they’re not for beginners and it’s really easy to lose your money on them if you don’t know what you are doing. Stock doesn’t expire, it just has the risk of going to zero if that company fails. Stock options always have an expiration, the risk to match the high potential reward.

    Typically I use ThinkOrSwim, TD Ameritrade’s platform for the charts and up to date information since RobinHood’s charts leave much to be desired, and then I execute the actual trades on RobinHood.

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