Saturday, April 07, 2012

Getting Comfortable in the Cloud

Online investment software is moving from downloadable applications to cloud-based tools—reachable and operable from any computer you choose. What the excitement’s about, and a few cautions.

“Cloud-based computing” is a bit of jargon that has been hard to avoid for the past couple of years. But it’s definitely a phenomenon that’s here to stay, and will only grow in importance.

For active traders who, until now, have been using downloadable software-trading applications that feature streaming data and live charting, is there a cloud-based application that offers a distinct advantage? It’s a question worth answering.

AT CHARLES SCHWAB (schwab.com), Kelli Keough, vice president of active-trading services, detailed for us the plan to move her firm’s high-powered application, StreetSmart Edge, to the cloud. The main advantage, as she sees it, is the ability to run StreetSmart Edge on any computer, allowing a trader to easily move from one computer to another and still have access to all of the necessary features and personalized tools.

A key benefit of a cloud-based active-trading platform is that it lets you store your layouts and preferences on Schwab’s server, rather than your own machine. This means you can have the same screen setup, no matter where you’re located, or what device you’re using.

Already, several online brokers utilize the cloud; Keough notes that many brokers’ Websites and hybrid platforms have been cloud-based for years. Fidelity, for example, has a “bridge” application that provides streaming functionality. It launches from activetraderpro.com; you can customize the layout, and then save it, so you can access the same software layout from any computer. TD Ameritrade’s Trade Architect, optionsXpress’ Xtend, and tradeMonster’s basic platform also allow clients to customize the layout and user tools, and save those settings for use on another computer.

Schwab plans to make the entire tool-kit available in its downloadable desktop solution to the cloud, Keough says: “With our solution, there aren’t any sacrifices. All the tools from the downloadable application will be in our cloud-based solution.”

A key client group that will benefit: Mac fans, who in the past have had to use a Windows emulator to run most of the desktop applications. Quips Keough, “We think our Mac users will be on cloud nine.”

The newest release of StreetSmart Edge, which will be available starting April 19, will include point-and-figure charting, as well as a block-trade indicator, which helps a client know whether large blocks of stock are being traded. Schwab is also adding exchange-traded fund research to the StreetSmart Edge platform itself; currently, you get moved to a built-in Web-browser page in order to view ETF data and screeners.

Keough says that Schwab has a number of clients beta-testing its cloud-based StreetSmart Edge platform. The firm plans a phased roll-out of the remainder of its active- trading client base, beginning April 19. The plan is to contact clients to let them know they are eligible for the new platform, building capacity as client demand grows. Says Keough: “We want to make sure the experience is great as we grow.” She says that clients interested in switching to the new platform earlier can reach out to Schwab’s active-trader support group, and move higher on the list.

NETWORKING FOR THE CHART-CENTRIC: A new global Website, TradingView (tradingview.com), has opened its virtual doors, allowing traders to exchange ideas based on highly interactive, real-time charts. Right now, the site appears to be focused primarily on technical charting, though there are plans to add fundamental data to the mix in the near future. TradingView’s parent company is MultiCharts, which publishes an analytical trading platform that can connect to a wide variety of online brokers.

The current suite of tools available on TradingView is free, and the charts are actually fun to play with. You can look at studies published by other members, and share your own. You can analyze not only a wide variety of stocks, but also foreign-exchange pairs, futures, and indexes. Members are rated; you can find people who are interested in the same items you’re studying, and follow them as you would on Twitter. There’s a short video introduction at youtube/keuJQJEzg5U.

My main fear when I check out social-networking sites for investors and traders is that pump-and-dump schemers will be hanging out, trying to get the naïve trader to buy into a risky stock.

In the time I spent poking around on TradingView, however, those sorts of smooth operators weren’t in evidence. While it’s important to take what a total stranger on the Internet recommends with a very large grain of salt, I also find value in checking over ideas posted by knowledgeable traders. And there are plenty of people with interesting ideas on TradingView. The Website’s features let them illustrate their ideas with actual price and volume data, as well as a wide variety of technical studies. For the price, it’s well worth checking out.

SPEAKING OF PRICING, there are several ways to figure out how much it will cost you to trade if you’re an ING Direct/ShareBuilder client. In Barron’s annual review of online brokers, we said that ShareBuilder (sharebuilder.com) was one of the most expensive places for both occasional and frequent traders. We used the pricing listed for those who opted for the “Basic” program, but the costs would have been lower if we’d used the “Advantage” program instead.

ShareBuilder customers can sign up for the Advantage for $12 a month, which entitles them to 12 commission-free automatic investments, and a $2 per transaction discount on real-time trades. There is also a discount on margin rates. Had we used the Advantage-program pricing, the monthly trading cost for occasional traders would have come out to $102.60, rather than the $104.60 that Barron’s figured in its online-broker review.

The cost differential is much greater for the frequent trader. We calculated $3,420 per month, based on 100 stock and 100 option trades, plus $30,000 in margin debt, which is correct if the customer is a Basic program member. Ponying up the $12 for the Advantage program would drop the cost to $2,530, and put four other brokers out of the other 26 in the story ahead of them in our “Highest Cost” table. However, ShareBuilder’s tools are more suitable for buy-and-hold investors. The ShareBuilder Advantage Program make sense for those who will make more than three automatic investments each month, or eight or more real-time transactions. 

Published in Barron’s, April 9, 2012. 

Posted by twcarey on 04/07 at 10:10 AM
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