As computers gain processing power (see Moore's law) it has become easier to leverage this to evaluate the market on a deeper level. A method of using Artificial Intelligence to weigh news events was created by http://www.stockhawk.net. This method tracks words and phrases in news articles, and then takes the change in price as an action indicating whether the word or phrase is positive or negative. Over years, hundreds of uses of each phrase would give words a strong positive or negative relationship. This technology can then be leveraged to explore the historical significance of a news item.

Cost

Trading Equipment

Some day trading strategies (including scalping and arbitrage) require relatively sophisticated trading systems and software. This software can cost up to $45,000 or more. Many day traders use multiple monitors or even multiple computers to execute their orders. Some use real time filtering software which is programmed to send stock symbols to a screen which meet specific criteria during the day, such as displaying stocks that are turning from positive to negative.

A fast Internet connection, such as broadband, is essential for day trading.

Brokerage

Day traders do not use retail brokers because they are slower to execute trades and charge higher commissions than direct access brokers, who allow the trader to send their orders directly to the ECNs. Direct access trading offers substantial improvements in transaction speed and will usually result in better trade execution prices (reducing the costs of trading). Outside the US, day traders will often use CFD or financial spread betting brokers for the same reasons.

Commission

Commissions for direct-access brokers are calculated based on volume. The more you trade, the cheaper the commission is. While a retail broker might charge $10 or more per trade regardless of the trade size, a typical direct-access broker may charge as little as $0.004 per share traded, or $0.25 per futures contract. A scalper can cover such costs with even a minimal gain.

As for the calculation method, some use pro-rata to calculate commissions and charges, where each tier of volumes charge different commissions. Other brokers use a flat-rate, where all commissions charges are based on which volume threshold one reaches.

Spread

The numerical difference between the bid and ask prices is referred to as the bid-ask spread. Most worldwide markets operate on a bid-ask-based system.

The ask prices are immediate execution (market) prices for quick buyers (ask takers) while bid prices are for quick sellers (bid takers). If a trade is executed at quoted prices, closing the trade immediately without queuing would not cause a loss because the bid price is always less than the ask price at any point in time.

The bid-ask spread is two sides of the same coin. The spread can be viewed as trading bonuses or costs according to different parties and different strategies. On one hand, traders who do NOT wish to queue their order, instead paying the market price, pay the spreads (costs). On the other hand, traders who wish to queue and wait for execution receive the spreads (bonuses). Some day trading strategies attempt to capture the spread as additional, or even the only, profits for successful trades.

Market Data

Market data is necessary for day traders, rather than using the delayed (by anything from 10 to 60 minutes, per exchange rules) market data that is available for free. A real-time data feed requires paying fees to the respective stock exchanges, usually combined with the broker's charges; these fees are usually very low compared to the other costs of trading. The fees may be waived for promotional purposes or for customers meeting a minimum monthly volume of trades. Even a moderately active day trader can expect to meet these requirements, making the basic data feed essentially "free."

In addition to the raw market data, some traders purchase more advanced data feeds that include historical data and features such as scanning large numbers of stocks in the live market for unusual activity. Complicated analysis and charting software are other popular additions. These types of systems can cost from tens to hundreds of dollars per month to access.

Day trading Cost Topic - Investing

In finance, investment is the commitment of funds by buying securities or other monetary or paper (financial) assets in the money markets or capital markets, or in fairly liquid real assets, such as gold, real estate, or collectibles. Valuation is the method for assessing whether a potential investment is worth its price. Returns on investments will follow the risk-return spectrum.