Essential Trade Tools for the Advanced Investor

Although the brokers profiled in Part II of this series are more than adequate for most investors, a rising number of investors have looked to move beyond traditional equity investments and want exposure to more exotic investments such as commodities, currencies, options and the like. These investors are typically willing to pay hefty monthly fees to gain access to robust trading platforms where they can slice and dice data, toggle around with charts, and create complex scenario-dependent investment schemes. Here’s what these folks use:

TradeStation
This firm has been thriving for more than a decade by offering continual enhancements to its trading platform that mimics all the bells and whistles that professional Wall Street traders have at their desk. Version 9.0, which was recently released, is the most advanced “back-testing” platform out there, which enables investors to try out different strategies and see how they would have done if implemented over a previous time period. (For example, how did housing stocks perform the last time the Fed raised interest rates?)

TradeStation's platform also allows investors to set up alerts whenever a certain condition has been met (such as a price move on certain volume when another stock is making a similar move). The real trouble is that the platform has so many tools that it can take quite some time to master. TradeStation is clearly aimed at folks that devote hours and hours to investing every week.

Need to know: Clients that keep $1 million or more assets or make a large number of transactions can use TradeStation for free. Other programs range from $60 a month up to $300 a month.

Trading Options
Other sites tend to focus on certain areas of expertise. For example, several online brokers focus primarily on options trading. Many of these sites help automate the process of calculating all the variables needed to pull off a complex options trade, and some even suggest alternatives that can bolster returns. OptionsXpress.com, tradeking.com and optionshouse.com are all worth a close look.

Trading Futures Contracts
As individual investors start to venture into hot areas such as commodities, they’re moving beyond commodity-focused stocks and ETFs and into actual futures contracts (which are valued on where a commodity such as natural gas or cotton is expected to be valued in a year or two). Most of the mainstream online brokers are beefing up their futures trading capabilities, but active investors in this arena need more robust offerings.

Trademonster.com, which is already well-known among investors that trade options, has been beefing up the futures-oriented elements of its website.

Trading Currencies
Some investors have started to dole out a portion of their portfolio to foreign currencies. Buying other currencies can help hedge an existing portfolio of U.S. stocks, or it can be a simple way to look for capital appreciation. Foreign exchange sites include everbank.com, which offers Certificates of Deposit (CDs) in foreign currencies, oanda.com, and easy-forex.com.

Trading on Margin
Many sites offer margin accounts, which enable clients to borrow against the value of their portfolio to re-invest in more funds in hopes of magnifying returns. Most sites charge 6% to 9% interest on those borrowings, but InteractiveBrokers.com charges far lower rates of interest, as low as 1%, depending on the size of a client's asset base. The firm can afford to offer such rock-bottom rates because interest rates set by the Federal Reserve are so low right now. Some investors have chosen to borrow at low rates and then invest in stocks and bonds that offer high-yields, known as a "carry trade."

Interactivebrokers.com also holds great appeal to investors that like to buy foreign stocks directly in their home countries. The firm's platform has access to stocks in more than a dozen stock markets around the world. Yet this site is really geared towards very active and professional investors. If you aren't in the market every day, this site may be overkill.

It pays to spend time with all of the websites mentioned in this article. They have much in common, and much that sets them apart. Depending on your level of sophistication and budget, one of these sites is just right for you.
 

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