Robert Webb has schooled generations of entry-level traders, teaching courses on trading and the nature and structure of markets at the University Of Virginia's McIntire School of Commerce. He has watched trading technology advance to where the average soul on the street can use tools once reserved for the market's most elite actors.
In a world where "the cost of computation is close to zero," Webb says, access to the internet and reams of rapid-fire information even the playing field. What then separates one investor or trader from another is "critical judgment, as well as experience," he said. "With the advent of high-frequency trading, it becomes even more important to trade smarter, and to recognize what you can't do."
The ability to trade smarter is what the top names in trading tools aim to provide in their online offerings. In IBD's 2017 Best Online Brokers study, all the top three brokerages in both the Equity Trading Tools and Mobile Platform/Mobile Trading Opportunities categories have been steady winners in the survey over the past three years.
TD Ameritrade (AMTD), Fidelity and Charles Schwab (SCHW) hold the top three slots in both categories this year.
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To determine the rankings, Investor's Business Daily and its polling partner, TechnoMetrica Market Intelligence, asked investors to rate how well their primary broker performed in 13 critical categories, which investors themselves judged as most important among a list of 24 broker attributes. (Read more about the study details in our survey methodology story.)
All three top brokers are moving aggressively to expand and fortify their mobile trading options, while at the same time keeping entry-level tools straightforward and simple.
Web-Based Trading Vs. High-End Platforms
The industry has generally adopted a three-tier model for its online trading systems. The most essential tools are set up in online web platforms at Fidelity.com, Schwab.com and TD Ameritrade.com. All three web-based tools offer broad-range functionality, ability to trade stocks and options and to create extensive and detailed watchlists, among other features. Ameritrade brands its web-based product under the name Trade Architect. Schwab's basic product is Trade Source.
More aggressive investors generally gravitate to downloadable trading platforms. Fidelity's top-line model, Active Trader Pro, was developed in-house. Schwab's top-shelf product was originally based on trading tools evolved from its $488 million acquisition of Austin, Texas-based CyberCorp. in 2000. Schwab upgraded the brand to Street Smart Edge in 2011, following its $1 billion acquisition of Chicago-based OptionsXpress.
The purchase was aimed partly at acquiring options-based tools and features, says Barry Metzger, senior vice president who oversees Schwab Trading Services. "But also (a focus was) really on the talent at OptionsExpress, in being able to understand what traders want and in building great capabilities."
Ameritrade acquired its high-end offering, Thinkorswim, with its purchase of Chicago-based online brokerage Thinkorswim in 2009 for more than $600 million.
Investors Or Traders?
While all of the high-end offerings are available to all company clients, they are specifically aimed at experienced, higher-frequency traders, rather than investors.
"This is a user who knows exactly what they want to do," said Nicole Sherrod, managing director of TD Ameritrade's Active Trader business. "We have clients who are trading futures at midnight, so we have to be sure that that app is just best in class."
The downloadable tools provide in-depth stock charting and tracking, the ability to automate watchlist screening and creation, and sophisticated trade placement and alert capabilities. Much of the computation is handled server-side, Sherrod explains, to avoid bogging down desktop computer memory.
All three brokers offer chart pattern-recognition functions in both their web-based and high-end tools. Schwab and Fidelity contract this capability through Ottawa, Ontario-based Recognia. Ameritrade has an in-house crew who handles chart recognition.
Best Mobile Trading Platforms For Investors
None of the leading brokerages would discuss specific numbers of clients using their products, but all report tremendous growth in their mobile trading platforms, the third tier of online trade tools, into which they are pouring an increasing amount of effort.
Among the most difficult challenges across the brokerages: grafting the mobile trading tools to both the web-based and high-end products.
"One of the things we really try to do is help create a consistent experience," said Jeff Chiappetta, vice president of client experience for Schwab Trading Services, "where clients can easily go from any one of our platforms (to another) and have the same look and feel and trading experience."
Fidelity has steadily crafted its products in-house, using third-party assistance judiciously and minus the bolt-on strategy of acquisitions. Throughout that process, consistency in the trade experience regardless of the platform, has remained a priority, says Jennifer Samalis, Fidelity senior vice president of brokerage products and customer experience. So has the intent to keep things accessible.
"One of the main driving components behind Fidelity's trading experience overall is simplicity and ease of use," she said.
Target Objective: Make Money
Webb's classes give some sense of how the average investor ramps up through the skill levels once beginning to trade online.
The classes cater to students getting an early start in the market, and are built around institutional-grade trading products from Chicago-based Trading Technologies. These allow students to create high-volume, algorithm-driven trading programs to take advantage of tightly specified fluctuations in the market.
Webb says students typically enter such courses wanting to trade stocks, and wanting to trade on a fundamental basis. He requires them to learn to trade futures, and to trade according to technical criteria.
"The objective behind trading is to make money," Webb said. "And some days the money may be in cocoa or sugar or cattle or crude oil. It may not be in stocks or bonds."
"Expose them to the world of trading, and let them decide how they want to trade," Webb said, "but be aware that a variety of highly successful traders use a whole host of different tools."