Saturday, July 26, 2008
Fidelity Revs Up Its Trading System
SURE, THE MARKET’S SLID INTO BEAR TERRITORY, but that doesn’t mean that traders—playing either the long or the short side—have disappeared. And it certainly didn’t deter Fidelity from a successful upgrade of its Active Trader Pro software, which became available in June.
Now up to version 8.0, the Active Trader Pro (ATP) program can be downloaded from Fidelity’s Website (http://www.fidelity.com). The application can be a little tough to find since it’s buried beneath a lot of the mutual-fund company’s menu choices. It’s only available to Fidelity customers who trade at least 36 times in a rolling 12-month period.
Commissions drop from as much as about $20 a trade to as little as $8 for active traders, and ATP itself is free to those who qualify. Transactions can include options as well as stocks and exchange-traded funds. As you trade more, ATP tosses more tools your way, all usable within the app, including Dow Jones news services (an affiliate of Barron’s), Level II quotes and interactive charting. Those who trade 120 times or more over 12 months are eligible for Fidelity’s back-testing tool, Wealth-Lab Pro. But more on that later.
A major focus of the updated ATP platform is streaming news from various sources. “Traders look for an edge in volatile markets, which lately have been news-driven,” says James C. Burton, senior vice president, Fidelity Personal and Workplace Investing. “The enhancements we’re announcing to our trading and research platforms deliver on our commitment to provide our brokerage customers with institutional-grade tools to help them become better investors and traders.”
GETTING STARTED WITH ATP involves downloading and installing the 29-MB file to your Windows-based PC. Fidelity recommends that you use one of the flavors of Windows XP (Home or Professional), or Vista, and have at least 1 gigabyte of random access memory (2GB is preferable). A high-speed DSL (digital subscriber line), cable or T1 (fiberoptic) connection to the Internet is also recommended; using dial-up or a satellite or cellular modem may result in data loss. You have to go through a security setup the first time you launch the application. ATP must be installed on every computer you use for your Fidelity account.
The focus on news includes tools such as pre-built and custom searches, tabbed navigation, and news alerts. When you get an alert, a small box pops up on top of your display, and a chime sounds. You can search the streaming news by ticker symbol, market sector, or the company shares you’re currently trading. The custom searches you create can be saved so that you can pull them up and run them quickly in the future.
News stories include embedded quotes and charts that float up when you mouse over the ticker symbol. You can also get an options chain from the floating chart by clicking on a link. If you’ve got several searches running simultaneously, you can tab back and forth using the folder labels, and ATP includes a quick link to a trade ticket from every headline. I got to the point where I had a dozen news tabs open; to close one, you just have to right-click on it and pick “Close Tab” from the menu that pops open.
Like most downloadable-trading applications, ATP lets you customize the layout to your heart’s content. Customization can include the location of your trade ticket, graphing applications, news alerts and portfolio management tools. ATP 8.0 offers the ability to undock a particular item, such as the trade ticket or the news alerts, from the main application, and place it wherever you want on your screen. You can also use multiple monitors with ATP 8.0.
Placing pretty complex orders is possible in this upgrade. You can make conditional trades—like, say, buying 100 shares of Intel (ticker: INTC) when the Nasdaq index hits a certain level—as well as set up exit points for positions when you open them. This system allows you to create multi-contingent orders, using three basic directions: “And At The Same Time,” “Or,” and “Then.” By combining these directives in different ways, you can create a variety of contingent transactions.
The options-order entry screen allows you to create strategies with as many as four legs, so that you can be selling and buying calls at four different strike prices. Options traders will be able to view the greeks, which measure a particular option’s potential risk and reward over time from the option’s chain displays. They also can use a multi-leg pairing tool that displays bid/ask spreads. They’ll also be able to find historical options charts.
THE NEW TOOLS and capabilities are well worth the drudgery of the download and installation process. Fidelity will soon be updating Wealth-Lab Pro to version 5.1 (the current version is 5.0), which lets you build trading systems based on a long list of technical indicators and fundamentals, creating “Buy” and “Sell” alerts. In the previous version you had to move around within the system to trade whenever an alert was issued. Now you can trade directly from an alert.
There is also an omnipresent manual-trade ticket window on the upper menu that allows you to immediately place an order. If you don’t want to take immediate action on an alert, you can stage trades in the Orders tool for later consideration and submission. Wealth-Lab Pro 5.1 fixes a small problem with the earlier version, allowing you to easily cancel and replace orders.
One of the most interesting tools built into Wealth-Lab Pro is the drag and drop Strategy Builder. This lets you develop your own trading strategy by choosing particular technical or fundamental indicators and then inserting them into a formula. The update includes parameter sliders for easy customization once a trading strategy is up and running. Good luck.
Published in Barron’s, July 21, 2008.