Monday, October 24, 2005
New Brain Boosters
NO MATTER WHAT YOUR TRADING OUTLOOK IS, you’re probably looking for new ideas. Here are a few sources to help you do just that.
MarketWise Trading School, which offers a variety of trading resources on its Website (http://www.marketwise.com), as well as a number of in-person training sessions, recently rolled out the MarketWise Profiler, a broker-neutral stock-screening program.
The Profiler has four pieces intended to generate trading ideas. The opening screen features the top 10 bullish, bearish, neutral and volatile stocks. Clicking on a symbol brings up a candlestick chart that displays three moving averages, along with the trading stage for the stock: The stages are broken into 12 categories, from Early Accumulation to Strong Markup, all the way to Weakening Decline.
The second piece of the Profiler is the Advanced Screener, which lets you look at stocks based on daily or weekly closing prices. You can choose the stage the stock is in, along with the current price range, average daily volume, and number of weeks the stock has been categorized in its current stage. For example, when we looked for stocks in the Mid-Accumulation stage priced below $30 per share with more than 50,000 shares changing hands daily, the Profiler located 417 ticker symbols (out of 6,500 possible.)
The third part of the Profiler displays trades generated by MarketWise’s trading system. There are two pieces to this one: breakout long trades, and breakout short trades (breakouts are when the current price pops above a moving average). Clicking on the Long or Short button brings up a list of current open orders and positions for that particular trading system, plus a list of trades generated by the system in the past.
The performance numbers are based on the assumption of a $10,000 commitment per trade, with strict adherence to “Stop Loss,” “Trailing Stop,” and “50% Reduction in Position Size when Target Hit” management techniques. In addition, if during the trading day the price of the stock moves 3% or more from the entry price or opening price, the trailing stop for the day is moved to 1% from the entry or opening price.
The Trade Planner comprises Profiler’s fourth piece. After filling in boxes for the stock symbol, stop-loss and target prices or percentages, plus planned trade size or dollar volume of the potential trade, the Planner tells you how much you could make—or lose—on this particular trade should it go according to your target (or stop-loss) profile. It also lists the daily and weekly stages the stock currently occupies.
The forms to fill in on-screen for the Profiler’s various features aren’t attractive, and are a bit confusing. For instance, after you fill in all the appropriate boxes, you have to go back to the top of the screen to click on the “Submit” button in order to get a report. This just seems clumsy. The Profiler covers 6,500 of the New York Stock Exchange and Nasdaq stocks. The data presented, however, are timely and interesting, and could well spark profitable trading ideas. The Profiler will set you back $49.95 per month, or $499.95 per year. At that price, I’d like to see the screens prettied up and made more user-friendly.
OVER AT OPTIONSXPRESS (http://www.optionsxpress.com), customers can get an idea of what their cohorts are doing with a new feature called Trading Patterns. Once a customer is logged in to the account and viewing a Detailed Quote screen for a company, a click on the Trading Patterns link brings up a list of other stocks or options being traded by fellow optionsXpress customers who hold positions in the company under view.
David Kalt, optionsXpress’ CEO, likens this feature to the Amazon.com comparative-shopping screen, which shows you books, music or DVDs that other buyers have picked up in addition to the one you’re considering.
Kalt contends that stocks, like other online products, have personalities, which can be applied when people are looking for ideas. “As you find stocks that you have invested in, the idea that you could use that info to find other, similarly behaving stocks, regardless of scientific status, is a great way to screen,” Kalt says.
For example, people who traded Netflix (ticker: NFLX) also traded Apple Computer (AAPL) and a couple of energy stocks. These stocks have little in common other than volatility. The idea is to introduce customers to securities they might not otherwise have found, and then encourage them to do additional research. The indicators are not directional or meant to be advice; they’re just a way of developing community at a brokerage while sharing ideas anonymously.
According to Kalt, there is a correlation between this feature and the Most Actives and Price/Percentage gainers. But as he’s played around with it, he thinks there are nuggets in a lot of these Trading Patterns that wouldn’t turn up otherwise. “It will pick up some outlying trends for people looking for trading ideas,” he says. The feature is free to optionsXpress customers.
TRADESTATION (http://www.tradestation.com), which offers a software platform for developing a trading system, recently announced it was lowering the qualifications needed for free access to its tools. TradeStation enables users to design, back-test and optimize custom equities, options, futures and forex-trading strategies with its powerful technical analysis and charting application.
To avoid the platform access fee of $99.95 per month, you still need a $1 million account. But now you have to trade 25,000 shares of stock, 100 options contracts, 50 futures contracts or 25 round-turn forex lots per calendar month to qualify. That’s down significantly from the previous requirement to trade 250,000 shares of stock, 2,500 options contracts, 500 futures contracts or 500 round-turn forex lots.
TradeStation’s platform has been updated to version 8.1. Co-CEO Bill Cruz demonstrated the enhancements to the platform during TradeStation World last month, a conference dedicated to users. In addition to the pricing changes, Cruz said TradeStation’s tick-by-tick database was being expanded from one month to six months, and that third-party data could be added using a formatting wizard. The data enhancement lets users import international data from other providers, and use those data in their trading models. There also are additional enhancements to the futures-trading features.
Version 9 will include additional forex capability when it rolls out in the spring, and will also feature enhancements to the company’s options-analysis program, OptionStation. The upcoming version will be able to test multiple strategies against an entire portfolio of stocks, and will provide detailed analysis on the backtests. This enhancement will allow users to perform backtests in a tabular format, rather than in a chart. Users will be able to automate an entire strategy plan from the portfolio-analysis window, rather than having to deal with a half-dozen program features.
I attended six sessions at TradeStation World, and was impressed with the depth of knowledge and the passion for trading apparent among users. Granted, only the most rabid users would take the time for a three-day conference, but it was an extremely well-run event, with numerous worthwhile speakers.
Published in Barron’s, October 24, 2005