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Five reasons why Interactive Brokers triumphs

January 25, 2012 By Leave a Comment

Interactive Brokers is by far my favorite broker. I have been trading with them ever since I started out in this business, and never miss to recommend them to anyone who asks for my broker. You can claim that IB is mainstream among active traders. Here are their strengths:

#1: Access to Worldwide Markets

Whether you want to place your trade directly on international exchanges, diversify your cash deposits among various currencies, deal with bonds, options, futures all at once, this is the one which gives you access to everything. Under normal conditions, your order is submitted to the exchange instantly and gets filled promptly (depending on market liquidity). For example, I once traded the Nikkei 225 Mini futures a few times on the Osaka Securities Exchange and bought German equities through XETRA without a single issue.

#2: Quality of Market Data

Besides gaining access to exchanges you would otherwise never reach, you can subscribe to their real-time market data feeds. I subscribe to the “US Securities & Commodities Non-Professional Bundle” which includes market data for stock, options, and futures products on: AMEX, CBOT, NYSE, NASDAQ, and OPRAE. Altogether, this costs you a mere $10 per month (given that your monthly commission is below $30). Even during volatile markets, I have not experienced any delay with its feed. Other providers such as eSignal had lagged several seconds during very volatile times.

#3: Extremely Low Cost

Trading up to 200 U.S. shares (including ETFs) costs just $1 in commission. That’s it, simple. One trade for futures contracts of the E-mini S&P 500 is charged with $2.01 per lot. IB encourages you to trade a few times per month, hence it enforces an activity fee of $10. If you create less than $10 in commission, you would pay the difference. Do not let this influence your trading decisions, as transactions with other retail brokers can easily cost you more per month if you are active.

#4: Mobile App

A few months ago, IB introduced an iPhone and iPad app called mobileTWS. It allows clients to trade while on the go and is already fully equipped with the most essential tools such as order management, portfolio and account values, market data, or charting.

#5: API for 3rd Party Platforms

Every relevant 3rd party application can make use of Trader Workstation’s (TWS) API. It makes possible to feed your favorite charting platform with IB’s real-time data. NinjaTrader or MultiCharts come to mind. The API even opens doors to automated trading systems that execute orders automatically on TWS.

For active and experienced retail traders, IB is a very compelling proposition due to the low hurdles for accessing and trading on international markets. The TWS trading platform is extensive and due to its complexity, you want to approach it with attention. Check every detail before submitting an order. In any case you need support, a representative is at your disposal via online chat or support ticket which are both attended to in a timely manner.

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The two approaches to discretionary trading

December 2, 2011 By Leave a Comment

Trading is not just trading. If you are a discretionary trader, there are actually two approaches to this business which are not elucidated clearly when people talk about it:

  1. Planned approach: A trade is planned in advance and executed.
  2. Real-time approach: Market conditions are monitored in real-time and opportunities are identified and taken on the spot.

The equipment and strategies differ from one another. In the second case, trading has the objective to capitalize on short-term sentiment by using advantageous pricing. You need tools such as market data feeds, an advanced charting package, and low commissions. A scalper would be better advised, focusing on the real-time approach, as outdated information is of little use. To crystallize one’s method, literally thousands of hours need to be spent in front of the charts. Only then you have sufficient experience to adapt to changing market conditions promptly enough. Every trading day is a new day with its challenges. Your performance is impacted if you are unable to read price action accurately.

A planned approach is less sensitive to performance pressure, however, one is not able to make use of most recent information. If something surprising occurs the next day, your plan can be turned upside down.

The way I trade trends nowadays involves elements of both approaches: Plan the trade and execute real-time. On evenings (and sometimes throughout the trading session), I would review the market and consider what the next day must offer in order for me to enter or exit a position.

Being able to interpret price action in real-time is even beneficial for the planned approach. Let’s assume you have defined an important resistance area X which the market needs to cross to reverse its current downtrend. You could place a buy stop order above X, to open a long position automatically while you are absent. Or you can choose to observe price action closely as soon as the market does reach X the next day. It could be a false breakout anyway.

Obviously most of us are unable to have the charts up all-day long, unless our job deals directly with financial markets or trading. One solution I have came up with is to set a price alert at price X. I can then glance at the market and evaluate whether I see the real-time price action promising enough to justify an entry.

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Online charting just got better with TradingView

November 20, 2011 By Leave a Comment

Although FreeStockCharts.com has been around for a while and very appealing to market participants, the developers of MultiCharts just took online charting to the next level with their newly announced TradingView. An excerpt from their about page:

TradingView is an innovative venture by a group of developers and traders with experience of building trading software, who share a vision that trading technology should be easy, powerful and accessible to everyone.

On top of real-time charting for various stocks and currencies (futures in near future), TradingView allows you to share your technical analysis and ideas in an instant with the community on the site. What is particularly noteworthy is that they regard this project as a work-in-progress because it is a “first step to having a full trading platform in a web browser” and therefore actively encourage feedback as well as feature requests from their user base.

TradingView is a compelling alternative to the established platforms and already appears to be putting their competition behind with their objectives. I highly recommend you to take a look and submit your feature requests through the feedback system on GetSatisfaction.

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