Most entry level traders would hire online brokers to handle their day trading tasks. Online brokers, after all, are accessible and less expensive. All you need is a credit card and an internet connection to hire online brokers The only problem with online brokers is the inherent fact that order execution can become relatively slow through them. Speed is of the essence in trading. A trader should have a system that can order and place trades on the dot if he or she wants to succeed. 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.
For professional day traders, success depends a lot on speed of execution. 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. This is because direct access trading, as the term implies, allow traders to order directly from a client or a market maker who is actually working on the floor of the stock exchange. 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 beinners forex trading.
Another reason why you should opt for direct access trading system is the fact that online brokers may also be clients of 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. On the other hand, direct access trading ensures that trades are executed with the market maker that offers the best price.
Another reason why direct access trading seems to be costlier is the fact that online brokers receive commission from payment for order flow. 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. Commission rates for each trade may fall within $15 to $35. There will also be additional monthly charges for the software, ranging from $250 to $300. 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. A trader must carefully choose the trading system that suits their needs in terms of price, performance and speed.
