BUSINESSWEEK ONLINE : MAY 22, 2000 ISSUE
COVER STORY How to Build Your Own Trading Desk Software and sites can give any investor the same edge as the pros Those slick TV ads for e-brokers portray online investors as hip, cutting-edge, the last word in trading. But the brokers and software vendors who cater to day traders feel only pity for the big online firms' customers. Are they using the hottest technology? No way. ''We call it 'e-mail trading'--you e-mail in an order, it sits on the broker's trading desk, and for five minutes you don't know whether you've bought the stock or not,'' says Warren Hansen, senior account executive at Dallas broker DirectAccessTrader.com. ''With us, you see the quote, hit the quote--bam!--see your trade, in seconds. You're not just watching the market. You're in the market.'' Most investors have no interest in day trading. But the software and data tools these hyperactive traders use could help more laid-back investors improve their results. If faster news feeds, sharper trend-spotting, and better execution net you an eighth of a point on a 1,000-share order, that's $125 in your pocket, whether you hold the stock for minutes or months. Major e-brokers are closely watching day trading to see which power tools they can adapt for their customers. As online investing matures, brokers realize their busiest customers--from those who trade weekly to the few who buy and sell several times a day--are driving their profits. ''All the top online brokers will offer active trader packages within the next 6 to 12 months,'' predicts Stephen Franco, San Francisco-based e-finance analyst for U.S. Bancorp Piper Jaffray. At the same time, day-trading brokers are making their tools more user-friendly. The result will be options for every level of activity. Take Charles Schwab, the biggest online firm. Unlike many e-brokers, Schwab caters to your Aunt Minnie with local offices. But if you make 24 online trades a year, Schwab will upgrade your account with a Velocity trading screen featuring expanded watch lists and better performance measures. Trade 48 times a year, and you'll soon get real-time quotes streaming across your screen. Schwab's commissions fall from $29.95 to $19.95 a trade on your 31st trade in a quarter and to $14.95 after 60 trades. If you really get the bug, Schwab can refer you to its recently purchased subsidiary, CyBerCorp.com, which caters to day traders. SCREEN HOGS. So what does a day trader have that you don't have, besides eye strain and a twitchy mouse finger? Three things: constant data and news, powerful charting and technical analysis software, and a direct-access broker that sends orders straight to the market. A sampling of power tools was on display at the recent International Online Trading Expo in Dallas. They're also reviewed in The Individual Investor's Guide to Computerized Investing, published by the American Association of Individual Investors (www.aaii.com, $24.95). Real-time quotes are becoming standard for most online brokers, and charting is featured on free sites such as MSN MoneyCentral (moneycentral.msn.com) and BigCharts (www.bigcharts.com). But such subscription services as WindowOnWallStreet.com and eSignal (table) give you up-to-the-instant quotes and news, plus charts you can customize and save. Be warned: You'll need the skills of an air-traffic controller, as well as a big monitor or two, to make the most of these services. You can cover your screen with a dozen mini-windows for charts, tickers, and headlines. But these dizzying displays may soon become the norm as e-brokers' customers demand multitasking screens to replace today's separate Web pages. How much data do you need? That depends on how closely you want to monitor your portfolio and time your trades. ''Lots of people want to know the latest news affecting their stocks instantly, even if they don't plan to trade on it,'' says Ralph Cruz, CEO of Omega Research, which owns WindowOnWallStreet. But even data junkies should be satisfied with Nasdaq Level I quotes, showing the best buying and selling prices for a stock. For $50 extra, Nasdaq Level II offers all the bids, including how many shares are on the block, for a clearer snapshot of a stock's supply and demand. But such detail is of little use to most investors. Budding chartists who want to spot trends with precision will need a technical analysis program. These packages let you combine buy and sell indicators into trading strategies, screen stocks to find those that fit your patterns, and test your theories against historical data. Technical programs aren't cheap, but two lower-cost alternatives are noted for their ease of use: MetaStock, which offers a $349 software package that uses eSignal's real-time data, and TC2000, which gives away its software but charges $29.75 a month for downloads of data that are delayed 20 minutes. Once you've pinpointed a buy signal, where do you take your trade? Fast as they are, regular online brokers don't always hit the best price. Neither do the day-traders' direct-access brokers--but they do boost your odds somewhat. The gains come at a cost: Unless you trade 50 times or more a month, most of these brokers charge up to $250 a month for connections and data feeds, plus $10 to $15 per trade. CULTURAL PLAYTHINGS? CyBerCorp, with its new CyBerX 2.0, and TradeScape.com are targeting active online investors with cheaper and friendlier versions of their day-trading packages. The appeal of these packages: ''Intelligent'' routing designed to send orders automatically to the dealer or market offering the best deal. For instance, their software tracks which market makers usually have extra shares to sell, so your 1,000-share buy order can be filled in just one transaction. Given the high cost of power tools, who's likely to buy them? ''Anyone who understands that commissions are just the smallest part of trading costs,'' says CyBerCorp Chairman Philip Berber. Besides the chance for better execution, power tools offer hobbyist appeal in a stock-smitten culture: ''Our customers are avid consumers of investment data,'' says Omega's Cruz. But if you're not willing to shell out big bucks for the latest day-trading software, don't worry. Some version of it will likely be coming to your online brokerage account before long. Best Bets Subscription services give investors up-to-the-instant quotes, news, and charts that can be customized. To make the most of these services, through, you'll need a big monitor By MIKE McNAMEE _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS How to Build Your Own Trading Desk TABLE: The Right Stuff INTERACT E-Mail to Business Week Online

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