How to Create a Trading Platform: 5 Key Steps

Are you ready to dive into the world of day trading? Do you want to learn how to create a trading platform that sets you up for success?

In his book Advanced Techniques in Day Trading, Andrew Aziz shares essential steps for setting up your trading platform. You'll discover how to choose the right brokerage, create an efficient trading environment, and implement crucial risk management tools.

Keep reading to unlock the secrets of building a robust trading platform that can help you navigate the fast-paced world of day trading.

Setting Up Your Trading Platform: Essential Steps for Day Traders

Choosing the Right Brokerage

When learning how to create a trading platform for day trading, your choice of brokerage is crucial to your success. You'll want to select a broker that offers direct market access, allowing you to execute trades swiftly and reliably. Unlike traditional brokers who may route your orders through intermediaries, direct access brokers like TD Ameritrade, Lightspeed Trading, Interactive Brokers, and CenterPoint Securities provide rapid trade execution – a crucial factor in the fast-paced world of day trading.

Before you dive in, it's important to understand the Pattern Day Trade regulation if you're trading in the United States. This rule requires you to maintain a minimum equity of $25,000 in your account. If your balance drops below this threshold, you'll face trading restrictions until you top up your account. Make sure you're aware of how your chosen broker categorizes day traders, as criteria can vary.

Creating Your Trading Environment

Once you've selected your broker, it's time to set up your trading system. You'll need a platform that offers quick trade execution, advanced charting tools, and features like hotkeys for rapid order placement.

Understanding the Montage Window

The Montage window is your command center, displaying crucial Level 1 and Level 2 data. Level 1 information includes the previous day's closing price, trading volume, Volume Weighted Average Price (VWAP), daily price range, and the most recent trade price. Level 2 data, also known as market depth, shows you various buy and sell orders from different exchanges. Mastering these displays will help you gauge market sentiment and potential price movements.

Configuring Order Types and Hotkeys

To trade effectively, you'll need to understand different order types. While market orders might seem tempting, they can lead to slippage. Instead, opt for limit or marketable limit orders to have more control over your trade prices.

Hotkeys are your secret weapon for swift trade execution. Take the time to set up and practice with keyboard shortcuts on your chosen platform. This will help you react quickly to market changes and reduce errors.

Implementing Risk Management Tools

Risk management is crucial in day trading. Familiarize yourself with various stop order techniques, including Stop Market, Stop Limit, and Trailing Stop orders. These tools help protect your capital from potential losses. You can also use One-Cancels-the-Other orders to simultaneously set a stop loss and a target price for your trades.

Building Your Watchlist

Start each trading day by creating a watchlist of stocks showing significant activity. Look for stocks with higher-than-average trading volume and fundamental factors that could lead to price volatility. These are often stocks affected by major news or events like earnings reports, regulatory approvals, or company changes.

Pre-market Analysis

Before the opening bell, analyze pre-market patterns and price movements to identify potential trading opportunities. Focus on stocks showing noticeable pre-market price changes due to significant news or company events. Narrow your list down to three to five stocks with clear trading ranges before the market opens.

Identifying Key Price Levels

To time your entries and exits effectively, you need to recognize important price levels where the stock might pause or reverse direction.

Using Previous Day's Highs and Lows

The previous day's high and low points often serve as significant reference markers. Additionally, trend-following indicators like the 200-day Simple Moving Average (SMA) and the 9-day Exponential Moving Average (EMA) can provide valuable insights.

Recognizing Support and Resistance

Look for critical price levels by analyzing price action patterns and corresponding trading volumes. Pay attention to wicks on daily candlestick charts, as they often signal pivotal levels where prices may bounce or break through. Moving averages can also act as dynamic support and resistance levels.

By following these steps, you'll be well on your way to creating a robust trading platform tailored to your day trading needs. Remember, success in day trading requires not just the right tools, but also discipline, continuous learning, and strict adherence to your trading plan.