The best online brokerage for day trading stocks in Canada depends on your needs as a day trader. That being said, we have found that Questrade is the best overall broker in Canada (read our full review) and is also the best broker for many day traders. It depends on your situation. We shall try to explain.
Day traders make their money (or lose it) by engaging in high-frequency trading and exploiting often tiny fluctuations in the markets. They hold purchased stocks for very short periods of time and very seldom hold any stocks overnight. So, one of the great enemies to their bottom line is overhead. Brokerage commission fees can really hurt a day trader’s bottom line.
Depending on what sort of stocks you are trading, commission fees can be mitigated by using certain brokerages. If you are trading stocks with a high purchase price in relatively low volume, Interactive Brokers is a great choice for your day trading. They have a minimum commission of $1 per trade @ $0.005 per share and a maximum commission of 0.5% of the trade. So, if you’re trading a stock with an expensive purchase price in smaller quantities, you can save a bundle. For example: if you buy 202 shares of a stock that costs $495 per share (total transaction price $100,000), you will only spend $1.01 on commissions. However, if you purchase 100,000 shares of a stock that costs $1 per share (total transaction price is again $100,000), you will pay $500!
If your fees will be higher with Interactive brokers, you should choose a broker that have a cap on commissions, like Questrade. Questrade charges 1 cent per share with a maximum commission of $9.95 and a minimum of $4.95, so if you’re buying 100,000 shares at $1 each, you will only pay $9.95 for the trade.
So, what’s the commission solution? When I was dabbling in high frequency trading, I had an account at both Questrade and Interactive Brokers. I used Questrade to reduce commissions that would be higher at IB and vice versa.
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Both Questrade and IB have a plethora of options available in this department. Interactive Brokers has a definite edge if you are planning on trading equities in markets outside of Canada or the United States, but their fees are also generally higher. Questrade is generally the lower cost option in our experience.