How to Select a Trading Platform that is Right for You

You’ll find as many different approaches to trading as you’ll find traders. Fortunately, almost as many alternatives for setting up your trading environment also exist. As technology develops and expands, online brokers are providing increasingly powerful trading tools for their clients. These tools include market research, charting capabilities, streaming prices, and news services. If your broker doesn’t offer a specific service, you probably can find it offered on the Internet.

Before putting your computer to work as a trading platform, you need to understand the two primary techniques for delivering trading tools and services. The first uses your Internet browser to enter orders and deliver all information. The other approach uses a stand-alone software program, an integrated trading platform, to interact with your broker and your brokerage account.

For the most part, integrated trading platforms are married to specific brokerage firms. Some brokers provide you with a choice. For example, Charles Schwab’s CyberTrader offers the integrated software-based system StreetSmart Pro and StreetSmart.com for web-based trading tools. TD Ameritrade offers Trade Architect or thinkorswim. E*Trade offers E*Trade Pro and E*Trade Pro Elite.

The approach that suits you best depends somewhat on your trading style, cost considerations, and your computer’s configuration.

Integrated trading platforms typically are direct-access systems. Although direct-access systems are offered in browser-based configurations, active day traders and swing traders may require a completely integrated, direct-access trading platform.

Browser-based trading environment

For most new traders, trading volume starts out relatively small. Your time frame for holding a position probably is measured in days to weeks or weeks to months. You probably won’t be making many intraday trades, except to automatically exit a position after a stop price is hit. In that case, a browser-based trading environment certainly is good enough to get you started and may be all you’ll ever need.

These systems may be tightly integrated or somewhat disjointed, depending on the way the broker implements them. Some brokers, for example, automatically fill in order-entry screens with as much data as can be gleaned from your account. Others make you type all the data into the order screen by hand. Some brokers provide pop-up order confirmation and fill reports, and still others have more restrictions on how they handle trading.

Pros

For the most part, almost any Internet-ready computer can support a browser-based trading platform. Although trading platforms use Windows most often, even Apple Macintosh or Linux systems can be used for most browser-based applications.

Much of the browser-based information offered by your broker is available to all clients, regardless of account size or trading volume. If your broker doesn’t offer something you want, you usually can find it elsewhere on the Internet, either free or for a modest fee.

Cons

When compared to an integrated software solution, browser-based trading is relatively slow, requiring you to open many browser windows and manually update account information. Depending on how well your broker implements these systems, a bit more typing may be necessary to enter and execute your orders.

On some browser-based trading platforms, your Internet session may be disconnected whenever your screen is inactive for an extended period of time. At best, this kind of interruption can be frustrating. Similarly, some configurations depend on your using a specific browser or may require that you download and install a special browser plug-in to operate correctly.

Integrated trading platforms

For very active traders, especially day traders and swing traders, and for traders looking to develop personalized trading systems, an integrated trading platform that doesn’t rely on your Internet browser can be a better solution. You typically download these software programs, install them on your computer, and then use them to access your brokerage account and trading tools.

The most sophisticated of these platforms provides an institutional-level trading experience. Some, for example, permit trading baskets that enable you to simultaneously enter orders for a number of different stocks. Others help you to define hot keys for fast order entry.

You’ll find that integrated trading platforms provide support for sophisticated strategies. The most flexible among them give you the ability to enter contingent orders, where, for example, a stock’s price may trigger an option order, or the execution of one order automatically cancels another. Several brokers offer the service of e-mail or text message alerts when a stock hits a price you’ve specified or an indicator reaches a preset level.

Pros

These trading platforms typically are faster and easier to use and customize than browser-based applications. The best among them have system-testing tools that help you fine-tune your personal trading strategies.

Cons

Integrated trading platforms can be expensive. Unless you have a large account balance, your broker may charge you either a monthly fee or base the access on your making a minimum number of monthly trades.

Furthermore, these platforms often require up-to-date computer equipment with a fast processor and plenty of storage to run well. Older equipment doesn’t run this software satisfactorily. And it’s likely you’ll need to use the Windows operating system.

Features to consider

When selecting a trading platform, look for the capabilities you need today with an eye toward future expandability. You may want to consider the features in the three lists that follow.

Trading tools to look for include the following:

  • Stock trading

  • Support of sophisticated option-trading strategies

  • Futures trading, especially single-stock and index futures

  • NASDAQ Level II access

  • Direct-access trading and ECN book data

  • Watch lists

  • Automatic e-mail or text message notification when a stock hits your price point

Analysis tools to shop for include these:

  • Sector analysis

  • Proprietary and third-party analyst’s reports

  • News feeds (Dow Jones, Reuters, and so on)

  • Real-time charting capabilities

  • Time and volume sales reports

Following are account-management tools that you may need include:

  • Real-time account balances

  • Real-time updates of buying power and margin exposure

  • Portfolio-management tools

  • Open-order status

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