Saturday, March 08, 2014
Fidelity Helps Traders Plan Exit Strategies
The firm’s online brokerage unit has integrated new software that helps frequent traders plot their escape. Also, TradeStation and Interactive Brokers.
Fidelity has just launched new software designed to help active stock traders get off at the right exit.
“We spent time with traders in their workplaces and in our labs, and what came up over and over is that people are good at identifying an entry point,” explains Ram Subramaniam, head of the firm’s brokerage unit. “But,” he adds, “when it came to getting out of a trade, things got a lot looser.”
As a result, Fidelity has created Trade Armor, which has been integrated into Fidelity’s Active Trader Pro, a downloadable program for the firm’s most frequent buyers and sellers. It helps guide them through various exits by tapping into its graphical layouts and technical tools.
The Trade Armor graphs display price support and resistance levels for a stock, along with your entry price (if you already have a position). You are led through the process of setting up a closing order, including placing bracket orders, in which you create a profit target or stop-loss level at which you want to sell.
When entering a new position, you also can set up the exit order and have the target prices displayed on the graph with triangular flags. You can modify your exit order by dragging the flags up and down the price chart. Those exit orders aren’t sent to the market until the price hits the right marks and can be executed. Otherwise, your exit orders would be out there for much of the world to see.
TRADESTATION HAS MADE major changes to the way its customers can develop and share tools they’ve created.
The online broker’s newly launched TradingApp Store (tradingappstore.com) lists a variety of technical-analysis tools, order-placement utilities, pairs trading, and charting tools that can be downloaded and added to your TradeStation platform. The firm sponsors a TradingApp contest that lets other TradeStation customers rate the available apps. Some apps are free, such as Exhilaration ETF, a trading strategy that buys when an exchange-traded-fund price pulls back and then exits, hopefully with a profit, after a few days. Others carry a subscription (which mostly range from $20 to $100 a month), such as Solidus Time Sales Pro, which identifies large volume trades, useful for active futures, stocks, and ETFs. Usually $20 a month, this app carries an introductory monthly price of $5.
What I find interesting about the TradingApp Store is that those who are conversant in TradeStation’s programming suite EasyLanguage can generate a little extra income by sharing their tool with others. TradeStation has had ways for its developers to share the tools they’ve written, but the store makes it much easier to sort through them and find what you want. And other customers will pay for the app, which TradeStation then deposits into your account.
Investors with more than $100,000 in assets at the broker now get the $99.95 monthly platform fee waived. That makes it accessible to less frequent traders.
INTERACTIVE BROKERS, Barron’s No. 1 online broker last year, has added some new wrinkles, especially for options traders.
The new Strategy Builder generates a multi-leg option order as you click on prices displayed in an options chain. As you click on the contracts you want, the tool recognizes the strategy you’re creating. For instance, if you buy a March call on Microsoft (ticker: MSFT) and sell an April call, Strategy Builder will identify that as a calendar spread, and let you further analyze the potential profitability before actually making the trade. The firm has also added the ability to create a delta-neutral options strategy with one click of the Delta Hedge button. This will add an appropriate-size stock leg to the strategy to make it delta-neutral, which is intended to balance out the effects of price changes as markets move.
You can pore over options strategies in IB’s new Option Strategy Lab, which lets you look at potential profit and loss based on your forecast for a stock’s price or volatility. You can enter “ Tesla Motors’ (TSLA) stock price will increase 20% by March 14.” The Lab lists the possible strategies that could profit from your forecast. You can then weigh them before making the trade. You can take that forecast even further in the Probability Lab, which lets you pit your forecasts against market probabilities, and build potentially profitable spreads graphically. Not bad.
Published in Barron’s, March 3, 2014.