CoolTrade is a tool to automate
your trading, but it isn’t a brokerage firm.
Therefore, you’ll need to choose one of the brokerage firms affiliated
with CoolTrade to execute and “clear” your trades once you’re ready to trade
Commissions - Commissions will be one
consideration in choosing a firm. Trading commissions can eat into your
profits if you are not careful about choosing a plan that fits your
needs. Commissions can vary greatly from broker to broker, depending on
the number of shares traded, whether the shares are in round lots of 100,
price of the shares traded and the number of trades you place each month. Stock
traders may even want to have more than one account if they have a trading strategy that
normally trades 100 shares lots and another strategy that trades 1000 share lots. It pays to read the
Margin Rates – Another consideration is margin interest rates. If you choose to have a margin
account and borrow against the value of your securities to open more positions,
you will be charged margin interest. Rates will vary by firm.
Typically, firms with the lowest commissions won't pay you interest or offer
a money market fund for your uninvested cash. This is how they keep their
costs down. If you anticipate having extra cash that you won’t use
for trading, you may want to keep it in another account where it can earn
Minimum to Invest - You should also check if there is a minimum to open an
account or a minimum number of trades required. Ask what happens if you drop below their
minimum account balance or trading volume.
Trading Minimum - Brokerage firms have their own minimums but there are
also account minimum balances required by the Securities and Exchange
Commission (SEC) for what it calls "pattern day traders." A day trade occurs when a trader opens and closes the
same position in a margin account on the same day. A pattern day trader
is any person who executes 4 or more day trades within 5 business days in a
margin account, provided the number of day trades is more than 6% of the
total trades in the account during that period. All pattern day
traders must maintain a minimum of $25,000 in equity at all times. More
information about these regulations is available at Day Trading Margin Requirements.
“Paper” Trading or Virtual Account – Some firms will allow
you set up a “paper” trading or virtual account once you’ve actually opened
an account with them. It will allow
you another chance to practice with your strategy with data from that firm,
rather than the CoolTrade data (which can vary slightly) and become familiar
with their trading platform.
Interface – Some brokerage firms require CoolTrade to display their
account/trading platform along with the CoolTrade Auto Trader and do require
more work to set up. You can check the
Community Board for comments from other
traders on ease of use for each brokerage firm.
- You can you day
trade in an Individual Retirement Account (IRA) but not all firms allow your
trade proceeds to be available to continue to open new positions
immediately. Interactive Brokers
is the only broker that we are aware of that offers something called an
"IRA-MARGIN” account. All other
brokers only offer IRA-CASH accounts.
An IRA-MARGIN account frees up your funds immediately after every
trade and thus allows you to continue opening and closing positions without a
waiting period. Whereas, an IRA-CASH
account takes 3 days to clear funds and makes you wait 3 days before you can
utilize the funds again, even if you have no open positions. Even though they call it an IRA-MARGIN
account, you still cannot borrow funds or short in an IRA account.
– If you have questions setting up your account, is there a live person who
can help you on the phone? Conversely,
does the firm offer online account opening to make it easy for you and save
Money – If
you need to transfer money easily from a non-retirement account, ask if they
offer a free money movement service through the Automated Clearing House
(ACH) to other brokerage firms and banks.
Most firms offer this and allow you to initiate a setup online that is
complete within a few days.
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