What differentiates gamblers and investors? Math.
In particular, investors have statistical expectations on their side. They know that upside potential outweighs the downside risk. If they make the same “bet” over and over again, investors will see a positive return on their money.
Active trading is a form of investing that allows investors to arbitrage values. By taking advantage of market mispricing, traders tilt statistical expectations in their favor. Unfortunately, most active traders treat trading like a video game. Numbers flash on a screen while traders take unnecessary risks that expose themselves to losses.
In this day and age, it takes more than flashy software to be a successful active investor. It takes access to data, an investing strategy that gives you a slight edge, and a willingness to follow your own rules when your heart screams, “NO!” TradeStation, an investing software for active traders can help you with the first two. As for following the rules, you’re on your own.
Here’s what you need to know about TradeStation before you consider an account
TradeStation makes money when you make trades.
Stock trades cost $5.00 per equity (not per share), and options trades cost $5.00 per option plus $.50 per contract (100 shares). In terms of brokerage fees, these are as low as other discount brokerage firms.
However, TradeStation isn’t the right firm for less active traders. Customers must make at least 50 options trades per month or trade at least 5,000 shares per month, or maintain a balance of $100,000 or they will be hit with hefty platform fees. The basic Trading Platform costs $99.95 per month. RadarScreen (the market monitoring tool) costs an additional $59.95 per month for those who don’t meet the trading threshold.
You’ll also pay a number of other fees, including a $35 annual fee if you hold your IRA at TradeStation.
Account funding minimums vary by trading class. For ETFs and other equities, you need just $500 or $2000 to trade on Margin. Options and futures require funding of at least $2000 or more (depending on how much you purchase). Anyone who wants mutual funds or bonds in their portfolio should hold those assets at a different brokerage.
EasyLanguage: Traders who want an edge, need to put in the time to learn to code. It’s simply not possible to maintain a sustained edge without technical prowess. Thankfully, TradeStation has a very simple coding language called EasyLanguage. EasyLanguage appears to be a cross between HTML and SQL. If you have any sort of objects based coding knowledge, you’ll pick up on the language easily.
The coding language not only makes it easy to look at beautiful (or ugly) charts. You can very simply create buy/sell strategies for specific equities.
Customized Trading Strategy (this one worked out well).
Technical analysis: TradeStation has over 40 years of historical data (and up to 90 years for equities). You can backtest all sorts of strategies on the data. The access to data makes it easy to study technical trends.
Instant market updates: Using TradeStation's RadarScreenⓇ, you can access real-time data on 1000 symbols. You’ll have the same inside edge as all other technical traders.
Best in class software: Speed and indicator accessibility are the two things that active traders need in a software. TradeStation offers both (plus flexibility if you will learn EasyLanguage).
Forum discussions:TradeStation has one of the most active forums in the trading world. Some of the discussions are helpful and constructive. Others quickly devolve into pissing contests. If you join the forums remember, it’s better to make money than to be right.
Free Trading for Active Duty Military: If you’re active duty military, you can learn to trade without commissions.
Requires programming: TradeStation offers “out of the box” solutions, but decent trading requires programming skills. Take the time to learn some programming, and it will pay dividends.
Emphasis on quantitative analysis: TradeStation doesn’t offer expert analysis for stock picking. This platform emphasizes quantitative indicators to the exclusion of other strategies. Even value investors who trade frequently might not find what they need in TradeStation.
Some expensive courses: Most of the webinars that TradeStation offers are free, but TradeStation also pitches several expensive courses. You can also pay $149 to onboard the software.
Nobody warns about risk-adjusted returns: Real investing is about risk adjusted returns. You need to protect your upside and your downside. Very few active traders discuss beta. You need to focus on risk-adjusted returns, even when you use TradeStation.
Makes stupid charts too easy: Cluttered charts aren’t insightful. They are stupid. Take advantage of simple visualizations, and rely on backtesting and computer programming for the rest.
What is this chart telling you? I don’t know either.
Final Thoughts on TradeStation
Making money as a trader isn’t an easy option. Most active investors fail to beat their benchmark, and most fail because they don’t follow their own rules.
TradeStation makes it possible for everyday investors with just a few thousand bucks to find, test and implement new investing strategies. Yes, there is a learning curve. Yes, you have to learn a new programming language. But at the end of the day, you need those types of advantages if you’re going to make money as a trader.
If you’re committed to active trading, consider TradeStation as your first choice broker. They offer low fees and excellent software. Plus, they offer tons of educational seminars and resources that will hopefully help you learn the trading game. They can’t guarantee your success, but they can push you in the right (rules-based) direction.