Tuesday, July 19, 2005

Automated Trading Tools

I got a question about trade triggers and such by a reader and turns out the reader was looking for a bit different information than the one I offered. I didn't want the information to go to waste. So, I'm sending it your way. Enjoy!

Yes, trade triggers have been an agonizing research experience for me the last few weeks. It's very difficult to find any of the brokers that offer such a thing. And the few that do offer 40 or fewer like Ameritrade.

I have not used trade triggers yet, mostly because I require more than the 40 triggers that Ameritrade offers. And I cannot find any other brokers that offer more. Though, you might check into Schwab's CyberTrader platform. From what I can tell they offer trade triggers but I have emailed their customer support and never received a response.

Interactive Brokers offer conditional orders that work similar to trade triggers. But, yet again, are restricted to around 40 or fewer. And they require for you to have their platform up and running otherwise you will lose your triggers. In other words, it's client-based...not server-based. At least from what I can tell.

MB Trading, from what I understand after speaking with support does not offer conditional orders/trade triggers.

So, from there I had to persue real-time quote monitors that alert you to a price change or level reached and then email/page/sound the alert. There you have another interesting scenario. Most real-time quote providers only allow you to monitor 20 to 50 symbols at a time in real-time. Probably the best source for real-time quote providers and their quote limits is the following site from quotetracker.com: http://www.quotetracker.com/qsources.shtml.

Now, there are a couple that will go beyond 100 symbols and that is Quote.com, Esignal (if you purchase additional symbols), and AIQ Systems (up to 700). I decided to go with AIQ systems because they also offer the alert triggers. I haven't received their software yet...but if interested I can email you what I think after I try it for a few weeks.

There's another step you can take if you decide to automate those triggers. Software like http://www.tradebolt.com/ and http://www.tradebullet.com/ can actually take the trades from your software package and place the trade for you. The tradebullet software looks especially interesting with their ability to handle just a plain text email of the order that can then connect with your broker. If this is the case, I should be able to program something from AIQ in the email alert and then tradebullet will place the trade. Thus, automating my trading. But, much testing will need to take place to see if this really works. Next week, I plan to talk more with tradebullet and really see what they can do for me.

Finally, I use the Wealth-Lab software product extensively and it has the capability to completely automate your trading systems. But, it requires a real-time provider and then you're forced with the maximum symbol limit. But, there are several traders I know that are utilizing IB and Wealth-Lab successfully. Here's a forum dedicated to this task: http://www.wealth-lab.com/cgi-bin/WealthLab.DLL/category?id=14. And another forum that caters to automated trading in general: http://www.elitetrader.com/vb/forumdisplay.php?s=&forumid=48.

On a side note, Wealth-Lab has been bought out in America by Fidelity, so there should be some automated trading capabilities built-in with that version.

One last option I could persue is that quotetracker can handle the real-time feed from AIQ...and wealth-lab can handle quotetracker's feed. This would get me past the max symbol limit and thus causing me to come back full-circle to wealth-lab in automating the trade triggers. Again, testing needs to be done to see if this would truly work.

I will add that from everything I have seen, Ameritrade's trade triggers look like the best package out there if you do not require a multitude of symbols to watch for. The best thing about the Ameritrade package is the trade triggers are server-based and thus you can go out on vacation, have your computer turned off, and Ameritrade will take care of trades and alerts. You can choose to have the trigger send you an email or actually make a trade for you. A trigger expiration date can also be setup. They will also give you the option to be notified a day or so ahead when your trigger is coming up for expiration. You can also base your trigger on an index and then submit an order for a particular stock based upon a condition the index met. Not too shabby. The current indexes offered are Nasdaq, S&P500, S&P100, DJIA, CBOE Volatility, Russell 2000, Amex Networking, Amex BioTech, Phlx Semiconductor, and Phlx Gold & Silver.
Look for Part II tomorrow where I detail a great find with a server-based alert provider. Also, if anyone has any experience in automating their trading with tools/brokers/quote providers such...do share! Leave comments, please.

Later Trades,



Anonymous said...

Can you trust that the brokers won't secretly look at people's trade triggers?

Michael Taylor said...

Good question. Traders have similar feelings with stop orders. In that, traders "see" the stops and shoot for them during the day. And testing has proven this type of behavior to be somewhat true.

Would a brokerage company "peek" at the triggers for their benefit? Yes, they could...but it'd be my guess that people are people and traders realize this. Whether it'd be stop orders or triggers...you just know where the masses set their conditions. They're going to gun for your trades regardless of how you set them. Know what I mean?

So, you test your conditions. If conditions hold true. Then trade and watch the real-world performance to see if your orders impact the strategy tested. If so, then it's time to think about trading size (too large, float to small, etc), how entered (stop, limits, triggers), and how exited (stops, limits, etc).

The shorter duration used the more these types of issues come up. And I'll be the first to admit...it has been a very long time since I dealt with these types of problems since all my systems are long-term in nature.

But, recently I have developed a fairly short-term daily system and the backtested performance is just too good to pass up. I'll be real-world testing it over the next few weeks after I get all this real-time monitoring/automation setup. I'll be sure to post about the issues more when they arise.

Thanks for the comment.


Anonymous said...

Whats your username on WL?

Michael Taylor said...