Order Routing

Order routing is the process of choosing which system to send the order through (ECN, market maker, etc., etc.). Unfortunately, this is not a choice that can be made by people who day trade through an online broker (ex: Charles Schwab) or a full-service broker (ex: Salomon SmithBarney). The investor who uses direct access, on the other hand, does have to decide which ECN to use or which market maker to trade against. For traders who are coming from the traditional online world and are used to simply specifying which stock they want to buy and how many shares, order routing might be a bit overwhelming at first; but once they learn how to read level II and how the mayor ECNs work, it will become extremely easy and they will begin to wonder how they ever survived without it.

Order routing is extremely important and, unfortunately, is overlooked many times by new traders and instructors who claim to teach day trading. I will make sure that you have a strong enough grasp of this subject before you start using a direct-access system for day trading or investing.