Investor Brain

Saturday, November 06, 2010

What's New at Online Brokers?

Defying the recent slump in stock trading, TradeStation and optionsXpress launch upgraded systems.

STOCK-TRADING VOLUME may have dropped in the second and third quarters, but that hasn’t prevented online brokers like TradeStation and optionsXpress from upgrading their offerings.

TradeStation (tradestation.com) recently gave us a peek at its updated TradeStation 9.0, which includes a new look and feel for the program. This brokerage firm is aimed at high-volume, professional traders who want to build their own systems, and take advantage of the historical database available for testing strategies. According to Janette Perez, vice president of strategic relations, many of the firm’s customers feel that they are competing with algorithmic and “black box” traders for profits, and therefore must be able to react quickly to the market. Perez says, “This release puts us far ahead in differentiating TradeStation from the rest of the pack.” Barron’s gave TradeStation four of a possible five stars in its 2010 ranking of the Best Online Brokers ("Newest Trading Play,” March 15).

Version 9.0’s opening screen features redesigned icons and links that take you directly to help and customer support. The help functionality was considerably less obvious in previous versions. There is also a “Quick Start” wizard that helps new customers figure out how to optimize the busy TradeStation environment.

The major strength of the TradeStation (ticker: TRAD) platform is the ability to build and test trading strategies–to create your own “black box.” Traders can monitor market depth and be alerted, or generate a trade, when a rule or trigger is met. The platform can perform risk assessments on open positions and execute transactions for you during fast upturns or downturns.

The upgrade succeeds in making it easier to find some of the platform’s tools, and expands its data analysis range to include market depth, among other things. EasyLanguage, which customers use to develop their trading systems, was extended in the new version, and the firm is hosting the TradeStation 9.0 Developer Challenge, a competition designed to recognize independently developed analysis techniques. EasyLanguage provides the building blocks for customers and developers to automate and test strategies in the equities, options, futures and foreign-exchange markets.

Perez says that the Plantation, Fla.-based firm has held three conferences for developers, who are writing add-ons to the platform that traders can utilize. More than 400 developers have more than 550 products available, such as trading algorithms and charting enhancements, says Perez.

This is a downloadable application that you install on each computer you’ll use for trading. It only runs on Windows operating systems, and a high-speed broadband connection to the Internet is highly recommended. Multiple monitors let you keep track of several different TradeStation functions simultaneously.

Casual traders and buy-and-hold investors shouldn’t consider opening a TradeStation account. There is just too much technology, and you have to pay for it if you don’t trade at a relatively high volume. The platform fee is $99.95 per month unless you trade a minimum of 5,000 shares of stock, 50 options contracts, 10 round-turn foreign-exchange lots or 10 round-turn futures or futures-options contracts. If you keep a $1 million balance, regardless of how much trading you do, the platform fee is waived.

The commission structure is pretty complicated; for equities, you can choose between a flat-fee per trade that ranges from $6.99 to $9.99, or pay a per-share fee of one cent for the first 500 shares and 0.6 cent for every share after that. The orders are routed differently depending on which commission structure you select. (Details are at http://www.tradestation.com/brokerage/commissions.shtm.)

The firm is rebating up to $500 of commissions for trades placed this year in new accounts opened and funded by Nov. 15.

OPTIONSXPRESS (optionsxpress.com) has added tab and grid views to its Streaming Charts functionality, which let you monitor multiple graphs simultaneously. If you choose “Tab,” then each ticker symbol on your watch list gets loaded into a full-size chart; to move between charts, you click on the ticker symbol in the tab. If you choose “Grid,” up to 16 charts per page can be displayed.

Streaming Charts can be set up for equities, options or futures. The charts update in real-time, and all associated technical studies are also updated. You can detach a chart from the main page, which is a function that is greatly enhanced by having two monitors–or more. Over 100 customizable studies can be added on charts, and the resulting charts can be saved or shared.

Streaming Charts is part of an upgrade to the entire site that also includes an optionsXpress (OXPS) extension for Google Chrome. The upgrade includes the integration of “Greeks” into the trade and probability calculator that helps traders figure desired entry and exit points faster. These are all features that help options traders make better decisions.

A FOREIGN FACEBOOK: Currensee (http://www.currensee.com) enables foreign-exchange traders to discuss their trades and monitor each other’s successes (and failures). Launched in fall 2009, Currensee says that traders from over 130 countries have linked their live brokerage accounts with one of more than 100 brokers supported by the platform. Members of this social network can see one another’s actual trades and share strategies in real time. The site also generates a variety of social indicators based on aggregated data to help figure out what does and doesn’t work.

The most recent addition to the site is the Currensee Trade Leaders Program, an automated service that enables investors to follow and, if they like, execute the trades put on by those rated most successful. The leaders are chosen from the more than 7,000 current members of the network, and are screened for historical performance, risk management and returns compared with the S&P 500. Investors can choose to track one or more leaders, and either mirror their trades on their own or automatically place the trades through the platform. Currensee assesses each Trade Leader’s background, controls and skills prior to giving them the designation.

You can view community sentiment and trading volume for a wide range of trading pairs. Your “Trading Friends’” open and closed positions are displayed on your positions table. It’s an interesting take on a type of trading that appears to be gaining in popularity.

Published in Barron’s, November 1, 2010. 

Friday, October 22, 2010

TD Ameritrade Launches Free ETFs

The online brokerage giant joins the commission-cutting fray with the largest assortment of funds yet. Also, a Website upgrade from Firstrade.

FINALLY JOINING THE free-trade fray, TD Ameritrade has begun to allow customers to trade about 100 exchange-traded funds without paying commissions. Other big-name brokers rolled out free ETF trades earlier this year, but TD Ameritrade (ticker: AMTD) is offering significantly more funds. The firm didn’t, however, couple the free ETF trades with a general cut in commissions. 

There are other catches, mostly to keep frequent traders from overwhelming the system. You have to hold the ETF for at least 30 days to get the commission waived; otherwise, it’s the usual $9.99 fee for a stock or ETF transaction. As CEO Fred Tomczyk says, “We haven’t lost our minds here.”

The free ETFs are part of the rollout of TD Ameritrade’s (http://www.tdameritrade.com) ETF Market Center, many of whose functions can be used by non-customers. The center is modeled on a similar product for mutual funds. It includes lists of “premier” funds, as well as screeners and other tools. To see the screener’s results, though, you must log into a TD Ameritrade account.

Tomczyk says that TD Ameritrade began participating in the exchange-traded fund market in 2004, when its Amerivest online advisory unit focused on ETF strategies.

The funds that can be traded commission-free were selected by an investment consulting unit of Morningstar and include ETFs from iShares, Vanguard, State Street, PowerShares, and others. In comparison, Schwab’s free ETFs include only 11 of its own funds. Similarly, Vanguard offers 62 Vanguard ETFs for free.

Though late to the table, TD Ameritrade is serving up heftier portions than its rivals. The next course could be interesting.

ALSO A BIT OVERDUE, Firstrade (http://www.firstrade.com) has redesigned its Website, which, in our view, had gotten tired in recent years. We were also disappointed that the data displayed were delayed; real-time info is important for making trading decisions.

All that is due to change on Oct. 20, when Firstrade launches an update that highlights speed, user interface, flexibility and customization. We were shown the new platform in early October while it was still in a beta test in a closed environment. It’s a straight browser-based trading application; no need to download applications or launch tools in a separate window.

The landing page you see when you log in is divided into two columns. The left side focuses on the investor’s account and has a drop-down selector so you can switch between accounts quickly. The right column focuses on markets—showing news, quotes and graphs. The columns can be collapsed or expanded, and the various boxes displaying data can be moved around.

At the bottom of every page is a simple order-entry ticket for stocks or single-leg options. On the far right is a box where you can see real-time positions, balances, open orders and executions.

“We wanted to make it convenient for customers to not only place orders, but be able to get quotes and research,” says the Firstrade vice president of business development, C.S. Hsia.

You can customize the columns displayed on the positions page. As you choose column headers and move them around, you can see a preview of the resulting report. The site also features newly designed stock, mutual-fund and ETF screeners.

Firstrade also has added the ability to place conditional orders, such as one-triggers-another and one-cancels-another. Although these features have been available on other sites for years, Hsia says that Firstrade’s conditional orders are stored in its own servers, which means they can be checked with every tick. Some broker sites review them only every minute, which can lead to trades that don’t fit your criteria.

One area still in need of some help is options trading, although the updated options chains are nicely displayed. The order ticket allows you to place only a stock order or a one- or two-legged options order, so the more complicated spreads have to be entered as a series of orders. This is a pretty major shortcoming.

The new platform does take a step into the community area. When an order is executed, you can tweet it or post it to Facebook. You can set your sharing posts to hide the quantity and/or execution price, and you can add a note that includes your rationale. On Facebook, Firstrade shows how many people have shared trades that day, and it can show your friends’ activity.

Commissions remain the same—$6.95 for a stock transaction and $6.95, plus 75 cents per contract for options.

Firstrade has taken a big step in the right direction, but there’s still a ways to go. 

Published in Barron’s, October 18, 2010. 

Saturday, October 09, 2010

Jumping on the iPad Bandwagon

As the number of users swells, the list of trading applications is also starting to grow and improve. E*Trade, Fidelity, Nasdaq get on board.

IPAD USERS, MORE THAN 7 MILLION strong, are doing everything on the devices—from playing “Plants vs. Zombies” to shopping for heavy-duty trucks. Based on our e-mail, quite a few Barron’s readers now own an iPad—a number that recently expanded to include yours truly. I made my purchase in early September, and have spent several weeks finding finance and trading-related applications. Here are some of my early findings. (Almost all of the apps are available at the App Store or via iTunes.)

Lots of the current apps are iPhone programs that also run on the iPad. They can be blown up to use the whole screen by tapping the “2x” button at the bottom of the display; otherwise they appear in the center of the screen in a box that’s the same size as an iPhone. Most iPhone apps that are expanded to fit the iPad screen this way don’t have very good resolution; the display looks ragged around the edges. That said, there are lots of worthwhile programs to consider.

ONLINE BROKERS WERE QUICK to jump on the mobile bandwagon. The success of the iPhone and iPad especially have prompted new apps, including those you download for free to manage your online account.

E*Trade (http://www.etrade.com) was among the first with an iPad-specific application, launched shortly after the device started shipping in April. Mobile Pro for iPad 1.1 is a nice step up from the firm’s iPhone app, and takes advantage of the additional real estate. You can select from a variety of functions; real-time charting and quotes can be displayed, along with news and CNBC video. The charting is limited to line charts, so this isn’t the app for a lot of technical analysis, but it’s possible to see your account balances and place trades.

Fidelity’s iPad app (http://www.fidelity.com) is not as flashy as E*Trade’s, but provides real-time access to portfolio values. The charting functionality is also on the light side, and you won’t find any video feeds. It’s a sturdy app that gives you mobile access to your Fidelity account with little glitter or glitz.

Although it won’t be out until November, TD Ameritrade’s (http://www.tdameritrade.com) iPad app will allow clients to trade stocks, futures, forex and options—without any of the typical mobile-device constraints like screen size and keyboard usability, says a spokesman.

Nasdaq OMX’s free app QFolio HD for iPad lets you view real-time streaming quotes and line charts for U.S. and Nordic stocks. (Prior to its acquisition by the U.S.’s Nasdaq in 2007, OMX was the Nordic stock exchange.) You can create a portfolio manually and get real-time profit and loss calculations. Charting is relatively basic, though you can add moving averages as overlays. This app has a link to the StockTwits Twitter stream.

Bloomberg for iPad, also free, lets you look at a variety of markets, including bonds, currencies, commodities, and indices. You can also check the action on a variety of foreign bourses, and create your own watchlist. Each exchange’s page includes a real-time chart, a summary of the performance of the various industries that are listed on the exchange, and the day’s movers.

If you create your own watchlist, called “My Stocks” in the Bloomberg app, a tap on the icon brings up your list and shows your P&L (if you’ve entered your trade data). You also get a small intra-day price chart as well as a visual indicator in green or red that shows whether the stock is up or down for the day. Tapping on the company name expands the display to full screen, where you can adjust the date range for the stock. This charting application does not let you stretch or contract the display, however.

An interesting charting application called iTraderPro was just released by Black Ops Entertainment. CEO John Botti explains that the company is traditionally a video-game publisher, but his interest in trading prompted a new 3D charting package. It will set you back $24.99, but Botti says, “People who pay the fee will save way more than that in the market by watching our buy and sell signals. We want to bring hedge-fund analysis to the retail investor.”

You can stack up as many as four stocks simultaneously, and shift your view with a finger. The app has several technical studies built in that will overlay the 3D chart, including Bollinger bands and moving averages. The app has buy and sell signals that you can choose to display on the screen, and you can also set price targets and get e-mail alerts. The initial release displays charts with end-of-day pricing, but Botti says two additional apps are coming in the near future. One will let you analyze intra-day prices, and the other will focus on options trading.

There are literally dozens more iPad apps worth mentioning, and we’ll keep you updated. If you have a favorite iPad application that you use to help you manage your portfolio or generate trading ideas, contact us at electronicinvestor@yahoo.com
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Follow-up:  With one exception (a rather nasty rant that accused me of being an Apple shill, and suggested that I “rot in hell” for telling people to buy an iPad, which I do not believe was part of the story), every email (several dozen) I received in response to this piece asked why there isn’t a Barron’s iPad app available yet.  What I was hoping to find from readers was what apps they had that they found useful. 

My editor at Barron’s says an iPad app is in the works, for those of you who are wondering. 

Published in Barron’s, October 4, 2010.