Day Trading Computer

Computers are so cheap nowadays that almost any new computer will be sufficient for day trading. Below I will highlight the basic components that you need for your day trading system: hardware, software, Internet connection, and system protection.

Hardware for day trading

Even though I do not have a Ph.D. in computers, I have used and helped people set up computers for day trading, and know other people that use computers for the same thing. Below I have provided the minimum general specifications for day traders followed by the preferred specifications (in parentheses):

• Pentium III 700 MHz or higher (Pentium 4 best)
• 128 MB RAM or higher (256 MB or higher best)
• Windows 2000 or XP (not Windows Me!)
• One 21-inch monitor (Two 19-inch or greater preferred)

Please note that you will need two video cards (one per monitor) if you want to use two monitors, or a multi-head video card (like Matrox or Apian) that allows you to connect more than one monitor to it (best option). Unless you are a computer expert, try to order the system exactly like you want it (turnkey) from your chosen computer vendor.

Every serious day trader uses special software for day trading. This software is installed on the trading computer mentioned above and through it the day trader analyzes stocks and places orders to buy and sell. Since the trading software is the most important component of a complete day trading system, it is very important that the software be well-known and widely used by traders. The software for trading stocks should have the following components:

• Level II (a list of all the buy and sell orders in the market)
• Time and Sales (list of all transactions)
• Real-time streaming quotes and charts (constantly updated with live market data)
• Portfolio tracker
• Real-time news
• Order entry built into the software

The best software in this category that I know is called RealTick. It is given to you by your broker (direct-access broker that uses the RealTick platform) when you open a brokerage account. I will help you through this step when you are ready. I work with a broker in Miami that, in my honest opinion, provides the best service and attention of all the local brokers that I have seen. If you want to work day trading currencies instead (forex trading), you don't need all the above features.

Even if you buy the best computer that is currently available, without a fast Internet connection you cannot receive all of the streaming, real-time information (quotes, charts, transaction information, etc.) provided by your day trading software. For that reason, a 56-Kbps regular phone line modem is not an ideal primary connection to the Internet (except in rare cases). Suggestions (if available):

• DSL (Digital Subscriber Line) service from your phone company, or
• Cable Modem service from your cable company

I have used DSL for a few years already and think it's great (right now I use DirectTV DSL and have used BellSouth DSL in the past). DSL is much faster than a 56-K modem. Even though I have no experience with the cable modem service, I know that many traders use it and it is also extremely fast. After you call your DSL company and order the DSL service (about $50 per month), it usually takes the company about 2 weeks to send you the modem and software you need to use the service. If you do not have DSL or Cable Modem service in your area, one option is always to trade in the broker's office, with one of the high-speed computers that are already set up there.

Back-up System: In a perfect world we wouldn't need a back up system, but we don't live in a perfect world. The most important forms of back-up for trading are:

• 56-Kbps Modem in case your DSL or Cable Modem service is disrupted
• Uninterruptible Power Supply (UPS) for a power failures and surges

Even though I've had very few cases when the DSL stops working during trading, it has happened. The same thing can happen to the Cable Modem service. When your high-speed service goes out, you can simply connect via your regular 56-Kbps modem via your phone line. Even though you cannot feed as much information through the 56-K service as you can with a high-speed connection, it still allows you to place trades and view some basic trading information. With RealTick, you can design a simpler configuration in the software for cases like these (the currency trading software works perfectly even with a 56-K modem).

A UPS allows your trading computer to run on back-up power when there is a blackout. Even though you cannot run on back-up power indefinitely (based on the limitations of the UPS), it does allow you to close any positions that you do not want to leave open as well as save anything that you were working on. A UPS will also provide protection from voltage surges that can damage your trading computer. In the United States we have the advantage that the power is pretty reliable, so if you don't want to buy a UPS right away when you start trading that's OK, but you should at least use a surge protector ($20 to $50) to protect your trading computer from sharp fluctuations in power which can easily damage or shorten the life of your trading equipment.