Super Sites for Online Investors

For Day Traders

Day traders are stock market guerrillas, jumping in and out of stocks within hours or minutes. Day trading advertisements on CNBC suggest that anyone with half a clue can amass a fortune trading this way. Good luck. In practice, most people lose money this way. Our advice: Practice long and hard before committing real dollars. Here's how you can take a test drive without spending a dime.

First and foremost, you need to use real-time quotes, not the delayed quotes most sites offer. Our favorite freebies are the streamers from Java Island BookViewer and #Daytraders, you can use the latter even if you don't trade through Datek. The Money.net streamer gives you continuous "Level I" quotes for up to 50 stocks, and Datek gives you quotes on up to ten stocks.

Many day traders study Level II quotes, which show not only the highest offers to buy (bids) and the lowest offers to sell (asks), but also the bids and asks for a given stock. Some traders swear by Level II screens, claiming that they give the most complete picture for predicting stock price movements. We're not aware of any free real-time Level II quote systems, but ActiveTrader.net offers a free delayed Level II display--useless for actual day trading, but perfect for practicing. MyTrack, also gives you a sense for how a Level II screen works.

Many traders like to check out the chat rooms. If message boards are the Wild West of online investment research, chat rooms are the saloons, and are to be visited with extreme discretion. The same caveats apply to them as to message boards, but the furious pace of trading often keeps you from checking up on what you read. It's even more important that you get to know the people posting before even thinking about acting on any information you read there. We recommend Brokerages/Investment Resources boards because its site managers carefully monitor activity and kick out the offenders, including spammers. report on day trading platforms. is another popular chat service.

Putting Practice Into Action

Okay, you've paper-traded for months and you even have an aptitude for it. If you're ready to commit real money, you should sign up with a direct order-entry firm, such as Taxes or Publication 550 which can cost several hundred dollars per month.

We found few sites that evaluate such services; most rate only the standard discount brokers, like Suretrade and Ameritrade. One option for getting the latest scoop on users' experiences is to plow through the last few months' worth of messages in Silicon Investor's IRS Forms and Publications Site, and Motley Fool's freetrade.com Also check out Don Johnson's freetradez.com The author, former publisher of the Online Investment Letter, provides a quick informal comparison of the major day trading platforms available.

One more caveat: U.S. tax laws favor the long-term investor, not the day trader. You could get nailed by nasty surprises such as the Investment Loss Limits regulation, which lets you deduct only up to $3000 a year in trading losses; and Wash Sales, which can prevent you from taking loss deductions in certain cases. Check out The Motley Fool's Taxes section, which covers basic tax issues, and Publication 550 at the IRS Forms and Publications Site, which details Wash Sales rules.

Online investing is clearly a hot area. According to The Gartner Group, the number of households accessing the Net for investment purposes has more than doubled in the last two years, from 10 million to nearly 26 million, and the growth shows no sign of letting up. Gartner Group analyst George Barto says that continued advances in technology and even keener competition will continue to pull in new users and stimulate more rapid trading.

Several sites, including freetrade.com and freetradez.com now offer no-fee stock trades. The end result? "The consumer wins," says Barto, "because you have a vigorous and liquid market. Online investing is a prime example of how the Internet has shifted the balance of power from the company to the customer."

Bryan Hastings, a former editor for PC World, now works at home and doesn't miss rush-hour traffic at all.