More on the Automated Trading Pilot with OptionsXpress

Trade-Ideas and OptionsXpress now offer fully automated equities trading to OptionsXpress customers. This offering is part of a pilot program that features the availability of a suite of tools at no cost to participants for the 3-month pilot. Please note: a subscription to Trade-Ideas PRO paid by participants is required to participate in the pilot. The cost of the subscription and more will be rebated back to participants from the commission on all trades (see pricing details from our previous post). Also note: ANY and all of these pilot details are SUBJECT TO CHANGE. What’s presented here is what’s known so far.

Already I am surprised by the amount of interest generated since mentioning it here. The enthusiastic response prompts us to provide more details.

Here is quick Q&A on the automated trading and pilot program.

• Q: Is the automated trading done through the web or via another way to connect to OptionsXpress?
  A: A downloadable Trade-Ideas application automates the trading. Right now we are calling this application, the “OptionsXpress Automated Trading Bot (ATB)”. Other suggestions welcome. Of course you can still access your OptionsXpress account as usual via the web.

• Q: How does Trade-Ideas send orders via OptionsXpress?
  A: Trade-Ideas connects to the OptionsXpress backend programmatically via an API. When a certain event takes place, such as an alert, our software sends an order to buy or short sell the stock depending on your configuration. The ATB automatically sends Stop Loss orders and Profit Target orders at the same time that the trade is entered.

• Q: Where and how do I create my automated trading strategies?
  A: The OptionsXpress ATB uses Trade-Ideas alerts and filters. A two (2) step process automates the trading. First, create a set up in Trade-Ideas – for example, when a stock crosses above the 200 day simple moving average on higher than usual volume. Second, test that set up with position management rules you configure in The OddsMaker to make its performance in the recent market are what you would want them to be if you were trading. If you like the results you are ready to automate the results rolling forward.

• Q: Can I get help on setting up a strategy via Trade-Ideas and The OddsMaker?
  A: Yes, we already provide one on one training to every new subscriber to Trade-Ideas to help them set up the strategy that works best for their particular trading style.

• Q: Will there be any training on how all of this new software works?
  A: We are going to set up special one on one training sessions as well as continued support to get everyone that is going to be taking part in the pilot up to speed.

• Q: Do I need to have The OddsMaker to take advantage of the automated trading?
  A: Yes. All of the automation software is based on The OddsMaker. Working with The OddsMaker prepares you to use the Automated Trading Bot as they use the same configuration settings. The OddsMaker is provided to you for free for participating in the pilot.

• Q: Does The OddsMaker factor in commission and slippage?
  A: There are settings in The OddsMaker that allow you to factor in commission and slippage. Note that differences between backtested results and actual results always exist, as a trader you have to be aware of that and manage risk appropriately.

• Q: Must I only auto trade or is there any ability for me to get in and out of positions on my own?
  A: You will be able to do a variety of trading. There is a complete automated mode that gets you in and out all programmatically. There are also user defined options where you can automatically enter but exit manually or vice versa. There is also an execution panel that lets you place any other kind of order that you may want to place as well as modify existing orders.

• Q: Can I set limits to how many times I want to trade per day?
  A: Yes. The configuration window contains options where you can set all sorts of limits on your trading including the total number of trades that you make per day.

• Q: Can I have multiple strategies running at once? For example one for shorts and one for longs?
  A: Yes. Run as many different strategies as you like at the same time. You are only confined by the buying power in your account. That is one of the reasons we suggest that you have at least 25K in your account to take advantage of NASD/SEC pattern day trading rules.

• Q: What does it mean if I am a Pattern Day Trader?
  A: Pattern day trading is an SEC designation applying to any individual who buys and sells a particular security in the same trading day at least four times in a five-day period, and for whom same-day trades make up at least 6% of the trader’s activity during that period. Pattern day traders are subject to special rules. Under the rules of the NYSE and the NASD, customers who are deemed “pattern day traders” must have at least $25,000 in their accounts and can only trade in margin accounts.

• Q: Are there any advantages to being a Pattern Day Trader?
  A: While the SEC makes a point that day trading is extremely risky there are some advantages to being a pattern day trader. You receive 4 to 1 buying power and are able to reuse funds from transactions that take place during the day.

• Q: Will I have to pay extra money for the automated trading to Trade-Ideas?
  A: No. You will not be charged for the automated trading by Trade-Ideas. You just need to have a subscription to Trade-Ideas PRO. Please contact us if interested in using The OddsMaker and the Automated Trading Bot – we will reserve a place for you in the pilot and provide you with the link to open an OptionsXpress account if you don’t already have one.

• Q: When do you think we will be able to start doing this automated trading?
  A: Most likely the pilot participants will be able to start trading toward the end of August. We have been exhaustively testing the software to get rid of as many problems as we can encounter and we want to make sure that we deliver a robust and stable product. Please remember this is still beta software.