Monday, August 29, 2005
Read All About It
AS A NEWS JUNKIE, I THOUGHT I’D REACHED Nirvana a couple of years ago when I started playing around with Google news alerts. I happily set up several dozen news alerts, and when one of my search conditions got a hit, I’d get an e-mail with a link to the entire article.
Well, Google news alerts are still useful, but they’re so 2004.
One major drawback is that they depend on you checking—and reading—your e-mail to see what’s happening. They also poll only a few hundred news sources. What if you’ve become addicted to a variety of weblogs as well as financial news services? You could easily spend hours every day checking all the sites you’ve bookmarked.
Take it to the next level by setting up your own Really Simple Syndication news aggregator. RSS technology lets you consolidate your favorite online news and Web sources, such as trading and investment sites, newspaper, trade, magazine and corporate sites, as well as blogs and podcasts, into a single aggregated reader. This is done by subscribing to each site’s RSS feed.
Because RSS feeds deliver information directly to subscribers’ desktops—not via e-mail—they are secure and spam-proof. Assurance Systems recently reported that 22% of legitimate e-mail does not make it to the intended inbox, and found one Internet-service provider (ISP) that is blocking more than 36% of the opt-in messages, such as Google news alerts, entering its system. As the fight against spam intensifies, these false positives increasingly prevent critical information from reaching consumers. The only way to find them is to wade through your e-mail spam folder, which can be ugly.
If you bounce around a Website that includes news, you may see some boxes that say “XML” or “RSS”. Those boxes indicate content you can push to your computer using a newsreader, rather than having to find it yourself. If you click on one of those red or blue boxes, however, you’ll see a page full of what looks like gobbledygook. Each RSS feed is set up to send out a list of article titles with short synopses.
RSS aggregators, or newsreaders, deal with mountains of what appear to be arcane and unreadable pages filled with programming codes, and turn them into easily readable pages full of news headlines. Best of all, you can pick and choose from among the news items available and customize your own financial alerts.
The newsreader periodically checks each RSS channel, updates all recently published news and items, and displays the results. When a headline is of interest, you can click it and go directly to the source.
One of the easier news-syndication programs available is FeedDemon from Bradbury Software (http://www.feeddemon.com, $29.95 to register). The program has hundreds of news feeds built in, which you can customize so you’re not faced with stories about Britney Spears when you’d rather be reading about insider trading.
FeedDemon’s screen has a three-part layout that lets you skim through available articles quickly. On the left, you’ll see a list of Channel Groups, such as Business, Entertainment and Technology. Clicking on a group displays all the online publications, Websites and blogs that are available within that channel. Should you click on a particular link, the center pane will display all the headlines available. When you click on a headline, the content of the article is displayed in the right-hand pane.
Certain publications will allow only a paragraph or two from the article you want; with a click, you can open a new window that will take you to the originating Website and let you read the article there. FeedDemon also includes a search tool that looks for other news feeds that might interest you. You can try it for free for a limited time.
On Alex Barnett’s blog, there’s a terrific tutorial for using FeedDemon entitled “RSS 101.” Check it out at http://www.extremepodcasting.com/screencasts/usingrss101.htm. Barnett’s screencast, which will run automatically in your browser, describes how to set up an RSS feed very eloquently—turn up your speakers to hear him chat through the process in his charming British accent.
There are quite a few news readers available these days, but most seem to be geared toward the serious propeller-head.
Another popular news reader is NewzCrawler (http://www.newzcrawler.com), which looks like Microsoft Outlook Express. NewzCrawler lets you subscribe and check for updates on sites that do not (yet) supply their content in syndicated format, such as Barron’s Online (http://www.barrons.com). This program is not quite as easy to set up and use as FeedDemon, but it does let you view and participate in newsgroups. The most recent version, 1.8 RC2, is much more friendly than the version (1.7) you may find available around the Web, as it includes a tutorial and a Startup Wizard that helps you through the initial configuration. Newz-Crawler carries a registration fee of $25.
Recently released in the U.S., NewsInABox (http://www.newsinabox.com) has one of the easier methods for adding a newsfeed to your page—just click on the “XML” or “RSS” box on the Website with the feed you’d like to follow, then drag and drop it onto your NewsInABox page. Adding a feed to most other newsreaders involves, at the very least, copying and pasting a Web address. NewsInABox is $19.95.
You don’t have to pay to set up your own RSS newsfeeds however. Firefox browser users can integrate RSS feeds, though it’s not nearly as easy as using FeedDemon. You can set up a personal “My Yahoo” page, by bringing up http://www.yahoo.com and clicking on “My Yahoo” in the top left corner. This is also somewhat more tedious than FeedDemon, but it’s free.
Speaking of news for traders and investors, StreetInsider.com (http://www.streetinsider.com) recently remodeled its site. The basic content, available for free, offers reports, delayed by one hour, of fundamental events (such as earnings and management changes), as well as rumors, analyst ratings, insider trades, trader talk, mergers and acquisitions, and other items of interest to those in the market.
Premium members can get it all in real time, and have it displayed according to the category of the article. Members can receive e-mail alerts on stocks in their portfolio (StreetInsider reports, press releases, SEC filings) and can receive alerts on any of the 20-plus actionable trading categories. You can also view the reports published on StreetInsider in your RSS newsreader.
Online Broker Update: Townsend Analytics (http://www.taltrade.com) now offers a free RSS feed that alerts interested parties to important information from Townsend Analytics and its RealTick direct-access trading platform (http://www.realtick.com). As far as I can tell, it’s the first online broker to jump into this arena.
MBT Technologies, parent of MB Trading (http://www.mbtrading.com), is rolling out its direct-access currency- trading system, featuring its MBTX direct-access smart router. This will allow traders to bypass deal desks and connect directly with electronic liquidity pools and banks. MBT Technologies offers more than 20 currency-trading pairs, such as euro/dollar yen/dollar, British pound/dollar, to name a few. Starting August 30, traders will be able to open accounts for a minimum of $1,000 (it’s now $2,000), or sign up for a free live-data demo.
Published in Barron’s August 29, 2005
Monday, August 15, 2005
Lowering the Velvet Rope
DETERMINED NOT TO BE JUST A BRIDESMAID, E*Trade is hooking up with Harrisdirect. Ameritrade, of course, had previously turned down E*Trade’s overtures, and instead wound up marrying TD Waterhouse.
Both E*Trade and Ameritrade have been intent on bulking up to benefit from the economies of scale they can realize, given the excess capacity of online brokers. And Harrisdirect and TD Waterhouse, both units of big Canadian banks (Bank of Montreal and Toronto-Dominion, respectively), never achieved the size needed to make them competitive with their eventual merger partners, or other leaders such as Charles Schwab. Indeed, according to a research note from First Global, the operations of Harrisdirect were “more or less immaterial” to the bottom line of BMO. E*Trade, however, gets “the high-quality, affluent client base of Harrisdirect.”
Such customers—the sort reading this now—are the Holy Grail of mainstream online brokers, which seek to sell them an array of financial services. One way is to give breaks to the richest, most active clients. An example is Wells Fargo’s online brokerage firm, WellsTrade, which is connected to its banking site at http://www.wellsfargo.com. The site slashed its commissions for customers with a Wells Portfolio Management Account to zip for the top tier.
A PMA includes money-market interest rates, no-fee linked checking and savings accounts, a Wells Fargo credit card with no annual fee, free checks, free online banking and bill paying, overdraft protection and a combined statement that links all accounts.
Most brokers count only brokerage assets in determining the perks accorded to the biggest customers. Wells’ PMA takes into account bank checking and savings deposits, personal loans, credit balances, investments including individual retirement accounts—plus 10% of a mortgage balance with Wells. Counting a portion of your home loan, especially if you live in an expensive real-estate market, significantly lowers the bar for top-tier treatment.
PMA customers with more than $250,000 in total-relationship balances qualify for 50 commission-free online trades per year. Accounts with $100,000 to $250,000 get 50 online trades annually for $2.95 each. After those 50 online trades, it’s the same $9.95 commission paid by the hoi polloi with under $100,000 in balances in their PMA. More than 800 no-load, no-transaction-cost mutual funds also are available at all levels.
The Wells brokerage site is easy to use but somewhat spare in terms of amenities. In our annual review of online brokers ("Speed or Comfort?” March 7), it ranked near the bottom of our list; its formerly higher-than-average fees certainly hurt its ranking. But the new fee structure makes a WellsTrade account very attractive to a PMA customer with a large mortgage who wants to build long-term assets in a cost-efficient manner; for example, with regular purchases of exchange-traded funds.
Back to School: Three interesting resources for students of investing and trading hit my desk this week. One is a book entitled, The Investors Free Internet: How to invest in the U.S. stock market using free information from the Internet, published by Investors Internet (http://www.investorsinternet.com). The 281-page guide tells readers about a variety of free investment sites on the Internet, and how the information on each site can be used. It draws parallels between the business of investing and the operation of major companies. The authors picked their favorite freebies from the 2,000 sites they studied, then put together this guide on how to find, organize, synthesize and use the information available.
The book is can be purchased at its Website, as can a variety of subscription services based on the researchers’ findings. The book is $37.50; subscription services range from free to $29.97 per month.
The second resource is a CD-based course on chart reading and investment research, called InvestorsHelper. The designers estimate it would take about four hours to go through the material provided, after which the student would be prepared to analyze stock-price movements and predict price swings. Topics include charts, trend lines, channel lines, level lines and various forms of moving averages, as well as analyzing income statements, balance sheets, cash-flow statements and other fundamentals.
The lessons on the CD are extremely simple, occasionally a little too simple. If you’re new to the concepts of technical and fundamental analysis, the videos are helpful. There is a heavy focus on stock-price shifts, and how to predict them. InvestorsHelper is available at the company’s Website ( http://www.investorshelper.com) for $29.95. The CD includes a charting package called the Playground; it features the basic technical studies covered in the lessons.
It’s possible to find all of the technical-charting capabilities included in the Playground free at sites such as Prophet.net and Stockcharts.com, along with explanations. The CD does a good job of explaining “how to,” but seldom takes the extra step of explaining “why to.” InvestorsHelper is published by the Boloto Group, which, according to the Website, will be offering $10 trades at its soon-to-open online trading site, Boloto Financial.
Lastly, GAIN Capital (http://www.gaincapital.com) offers an online course for novice currency traders, called “Learn to Trade Forex.” This course, which can be found at http://www.learn-to-trade-forex.com, gives the student 60 days of access to course materials. Along with the program, students receive a demo trading account with $25,000 in virtual funds, allowing them to apply lessons learned.
Analytical Platform Updates: Townsend Analytics has added the Nasdaq’s market-data product, TotalView, to its RealTick trading platform (http://www.realtick.com).
TotalView provides market transparency by showing the complete depth of the Nasdaq market at all price levels, including the aggregated size of all quotes and orders available for execution in the Nasdaq Market Center for each Nasdaq National Market and SmallCap stock. It also includes multiple attributed quotes for each Nasdaq market participant, and net-order-imbalance information for Nasdaq Opening and Closing cross-eligible securities.
TotalView provides very fast Nasdaq order-book information as Nasdaq has made technology investments to reduce TotalView’s latency by more than 75%, to an average of less than 50 milliseconds.
ESignal, which provides streaming, real-time financial market data, news, analytics and decision support tools to professional and individual traders, has added Nymex Direct to its futures-data platform, FutureSource Xtra. A Web-based Java application, FuturesSource Xtra supplies the commodities, financial futures and foreign-exchange trading community with real-time market data, decision support systems and services covering a broad range of markets.
FutureSource builds its offerings from several core features, including streaming real-time quotes from over 50 worldwide exchanges, real-time interactive tick charting, full options coverage and news feeds delivered immediately on demand. Users can add or subtract modules as needed; for a complete list of FutureSource features, as well as an overview of the entire product line, go to http://www.esignal.com/futuresource.
Published in Barron’s August 15, 2005
Monday, August 01, 2005
Day-Trading Currencies, 24/7
CURRENCIES TEND TO BEFUDDLE MOST AMERICANS.
Accustomed to being able to use the same, simple greenback from sea to shining sea, we don’t have the same facility in trading currencies as Europeans, who historically had to swap francs for marks or lira. While the euro has eliminated much of that need, there’s more interest than ever in trading currencies, especially following China’s decision to loosen its tether on the yuan.
Because of the global nature of currency trading, the market is open 24 hours a day, seven days a week, so you can day trade all night long. It’s an extremely liquid market, with daily transaction volumes of $1.5 trillion to $2.5 trillion, and with players ranging from world banks to individual traders.
Since much of the volume is speculative, the spreads vary, which leads to arbitrage opportunities: There is no restriction on short-selling since you’re buying, or going long, one currency when you sell another. Forex Capital Markets (http://www.fxcm.com), which offers online currency trading to institutions and retail investors, states in its “Why Trade Currency?” leaflet that currencies rarely spend much time in tight trading ranges, and have the tendency to develop strong trends. The firm further states that a technically trained trader can identify trends and breakouts that provide multiple opportunities to enter and exit positions. Indeed, currencies tend to have the best-defined trends of any market, perhaps because they aren’t free of governments’ manipulation.
If you’re going to make money trading in foreign exchange, it’s good to have some education and training before you jump in.
You’ll hear the brokers who specialize in forex bang the drum of trading on margin, leveraging a small amount of money to make a huge pile, and so on. Do yourself a favor before following that seductive song: Learn as much as you can before opening an account. As each brokerage service is required to state in its customer information packets, “Forex trading on margin carries significant risk and is not suitable for all investors.” (It’s no surprise that it was the money changers—the biblical equivalent of currency brokers—that Jesus threw out of the temple for turning it into a den of thieves.)
To gain more practical knowledge about currencies, check out “All About...The Foreign Exchange Market in the United States,” published by the Federal Reserve Bank of New York at http://www.ny.frb.org/education/addpub/usfxm/ for some basic information on the structure of the market and the main players.
One way to get into gear is through mock trading. Several online brokers that offer currency trading post trading games, and it’s in your best interest to try out mock trading before you try doing it with real money.
OANDA FXTrade (http://www.oanda.com/), headquartered in New York City with offices in Zurich and Toronto, offers foreign-currency tools and applications as well as foreign-exchange-related content targeted at investors, businesses and travel clients. OANDA’s currency-conversion and localization services cover 164-plus currencies and are available in seven languages. Their mock-trading application is FXGame or fxtrade.oanda.com/fxgame/, and it credits the player with $100,000 in “play” U.S. dollars—and it’s free of charge. It’s a good way to get familiar with OANDA’s platform, and to decide it if will work for you when you start trading real money.
Forex Day Trading (http://www.forex-day-trading.com) provides a good basic introduction to currency trading under its “Education” tab off their main screen. One point the authors make when they discuss taxes is, “Forex traders don’t receive 1099 forms from their broker at the end of the year like stock and futures traders do.” The firm also notes: “Currency traders involved in the forex spot (cash) market can choose to be taxed under the same tax rules as regular commodities [IRC (Internal Revenue Code) Section 1256 contracts] or under the special rules of IRC Section 988 (Treatment of Certain Foreign Currency Transactions). IRC 988 applies to cash forex, unless the trader elects to opt out.”
You can sign up for a 30-day demo account at http://www.forex-day-trading.com/forex-simulated-trading.htm to check out the tools available at Forex Day Trading.
The majority of online forex brokers are market-makers, so they don’t charge commissions on transactions. They make their money on the spreads, and are often taking the opposite side of a trade from yours. Spreads are defined in “pips,” which is a unit of price change in the bid/ask price of a currency. For most currencies, a pip denotes the fourth decimal place in an exchange rate and represents 1/100 of 1%.
FXDirectDealer (http://www.fxdd.com) provides real-time margin-monitoring capability in numerical and graphical format, allowing clients to know where they stand in real time. FXDirectDealer has a charting package with tick charts, and minute, hourly, daily and weekly charts. Chart types include candlestick, tick and bar charts. Bollinger Bands, Moving Averages, Stochastic, MACD and Momentum can also be added. In mid-July, FXDD announced a two-pip spread on the EUR/USD (euro-to-dollar) and nine new currency pairs. The firm says it does not trade against its customers, due to parent-firm Compagnie Financière Tradition’s policies. FXDD allows a 60-day trial of their trading platform, accessible by clicking “Trading Platforms” on their main page.
OPTIONSXPRESS IS ROLLING out futures trading to existing customers, with a subtle “Futures” link added to the selections available under their “Trade” tab. They wrote their own futures-trading interface, rather than borrowing code from a futures house as do most other brokers. Some brokers require you to open a separate account to trade futures, but optionsXpress has figured out a way to allow trading of futures in the same account with stocks and options.
To be eligible to trade futures in an optionsXpress account, an investor must be located in the U.S., have account equity of $100,000, one year of prior futures-trading experience, minimum liquid net worth of $150,000, minimum income of $50,000, and speculation as an investment objective. Existing optionsXpress customers who want to take advantage of this new feature must indicate their interest. Applicants are reviewed on a case-by-case basis, and if approved, can trade financial and currency futures, interest rates, metals, and single stock futures. Commissions are $3.99 per contract plus exchange fees.
ONLINE BROKER NEWS: Ameritrade’s takeover of TD Waterhouse, announced in late June, is scheduled to close by year-end. Joe Moglia, Ameritrade’s CEO, says that he anticipates maintaining the majority of brick-and-mortar branch offices that Ameritrade (ticker: AMTD)will pick up with the TD Waterhouse takeover. One of Ameritrade’s strategies for continued growth is to become a major player in the long-term investor space; its Amerivest subsidiary is evidence of that strategy. Moglia believes that branches are worthwhile for the long-term investor, noting, “We may approach them a little differently because there might be some that don’t make sense.”
Published in Barron’s August 1, 2005