This week I wrap up my current series on active-trader platforms with reader comments on
TD Waterhouse's Select
Trader Work Station 4.0. (For my earlier columns, see the related columns box below.) Please note that all three active-trading platforms are in their initial rollout stages. TD Waterhouse announced Wednesday that its Select platform is now available to all eligible customers. Some customers at Datek and Interactive Brokers may still have to wait for access.
Related Active-Trader Columns
Review of Fidelity's Powerstreet Pro and Schwab's Velocity
Review of CSFBdirect MarketSpeed and TD Waterhouse Select
Review of Datek Direct and Interactive Brokers
Readers Weigh In on Brokers' Active-Trader Platforms
Each of the three platforms I'm discussing today uses Java applets to deliver real-time quotes. Allow me to digress for a moment on why this is important.
The use of Java is a departure from how active-trader platforms have traditionally been constructed. When a broker incorporates Java into its trading platform, it means that each time you log into your account, the broker's server sends down code that creates a software application right on your computer. When you turn off your computer, the application evaporates. Next time you log on, you download the application anew. Serious daytrading software resides on your computer's hard drive. Usually that means the program will tend to be more stable and perhaps faster.
That said, more brokerages are making the switch to Java.
a brokerage serving active traders, is working on a full-featured direct-access platform using Java. (See this related
column.) The broker is also designing a Java-based upgrade for
active-trader platform, called Power E*Trade.
What's Java's appeal? For starters, Java should save brokers money and time. Because users download the platform each time they log on, in effect, only one copy of the software exists. That means the broker need worry only about upgrading one version. Bugs can be fixed quickly. And there's no need to publish and mail CD-ROMs, then deal with thousands of customers who try to load those on widely different machines.
From the customer's point of view, a Java-based platform theoretically lets you trade from any computer -- usually including a Mac. The possible exception may be your at-work computer, since firewalls can be programmed to screen out some Java apps. Ideally, your broker should offer a standard Web-based platform as a backup for situations where a firewall blocks its Java apps. With a Web-based platform, you download pages from the broker's server, then you basically email your orders back.
, TD Waterhouse,
and Datek provide such a backup. Interactive Brokers does not.
A final caveat: Don't even attempt serious trading with a Java platform unless you have a broadband Internet connection. Dialing up can easily cause download delays. So the quotes you see may not be in real time.
End of lesson. Here's what readers had to say about TD Waterhouse, Datek and Interactive Brokers.
TD Waterhouse Select
As with Schwab, reader emails were more complimentary of TD Waterhouse the brokerage than they were of its Select trading platform. "I use Waterhouse basically as a high-interest, free checking account," says one active trader. "It's way better than a bank." But this reader's observation that Select's "servers are notoriously slow" was echoed in several other emails. "Their real-time quotes are very slow and sometimes unavailable," another trader noted. "The thing that has kept me there is a mutual fund that I like to trade short term," he says.
A check with
Keynote Systems, a company that measures brokers' Web performance, showed that TD Waterhouse's performance was about one second slower than the industry average during a recent week. Its transaction success rate -- measuring whether a broker's order-entry Web page downloads completely or within a given time period -- of 74.1%, was way off the average of 96.3%. The site offers an
explanation of how it performs its testing. A summary of Keynote's findings can be found weekly in
A couple of readers complained about mistakes with their Datek accounts. And several said that currently customers can execute only basic options strategies. But when it came to the Datek Direct platform itself, the praise poured in. "They execute faster than I could as an
member whose floor broker went out for a smoke seven times a day," wrote
, who once owned his own discount brokerage. These days Aronson trades from Hawaii. Sounds great, but if I lived there, I wouldn't want to be trading at the open -- 4:30 a.m., local time!
, who trades from Germany, can sleep in if he chooses, since the U.S. markets open at 3:30 p.m. local time. He's used Datek since 1999 and says he's happy with it. "My trades are mostly based on technical analysis," he says. "But nevertheless I build my watch lists carefully of companies that possess sound fundamentals, interesting products and/or strong market position." (FYI: Fuchs says he screens for stocks using
Trade Prospector and
When trading his Datek account, Fuchs uses a quote-display platform called
Medved QuoteTracker.com. Medved's a shareware program that, judging from the frequent emails I get, seems to have a large and loyal following. The multiwindow display depicting quotes, charts and news closely resembles the interface used by daytrading brokerages. QuoteTracker interfaces with a Datek account, receiving quote data from the brokerage. At the same time it allows you to route orders directly to Datek. Fuchs says he prefers this to trading through Datek Direct, which comes with fewer bells and whistles.
Interactive Brokers' Trader Work Station 4.0
Like Datek, IB prompted a few negative emails, even from fans of the service. In particular, users bemoaned the lack of handholding and occasional snafus. One reader who says he is a former futures floor trader makes 500-600 trades a day using IB and calls himself an "IB aficionado." Still, he notes, "I'm having a hard time figuring out Trader Workstation 4.0. It goes down more than I would like, and IB charges $30 per trade if you execute over the phone."
, a chemistry professor, uses IB for daytrading from 9:40 a.m. to 11:30 a.m., looking for short- or long-term breakouts. Perlstein notes that "directing orders to a particular ECN
electronic communications network -- using TWS 4.0 requires you to place a separate entry on your watch list for each ECN" in order to monitor its prices in real time. "There is no point and click feature for choosing the ECN on the fly," he says.
The reason is that the Level 1 quotes used by TWS 4.0 can't show the full depth of the market for a particular stock. For that you need a Level II screen, something IB doesn't offer at present. Datek Direct, by contrast, allows you to hit the bid or ask right on its Level II display, which automatically sets up the order. Perlstein's workaround for IB is to confine the bulk of his trading to the
ECN. Island makes its own Level II-like order book available free.
These gripes aside, the reactions to IB were overwhelmingly positive. "It really took me less than 30 minutes to learn Trader Work Station," writes
, who daytrades U.S. stocks from Venezuela. One time, he notes, he had to call IB from South America to see why an execution hadn't been confirmed. "In seconds I was talking with someone taking care of it," he says.
That concludes the first segment of what I expect will be a continuing series of active-trader broker reviews, a series that will rely partly on your experiences. Please keep sending your comments on the brokers you use to
Why devote so much space to reviewing trading platforms? Because a poorly designed platform or an unresponsive brokerage can easily cost you a mortgage payment if just one trade goes bad. Over time, it can cost far more. Moreover, if you're not comfortable with a particular platform, you'll likely trade less, and trade less effectively. And if you're really dissatisfied, you often must wait several weeks while your trading capital transfers to another brokerage. The goal of this series is to help you make the right choice from the start.
All that said, it's time for a break to some other topics. Next week, I'll be looking at brokers that allow options trading within an IRA.
Time to Chat
A reminder that my colleague
and I will be chatting about selecting an online broker here on
on Tuesday, Feb. 13, at 5 p.m. EST. Please join us!
Mark Ingebretsen, author of the forthcoming book, The Guts and Glory of Day Trading, has written for a wide variety of business and financial publications. Currently he holds no positions in the stocks of companies mentioned in this column. While Ingebretsen cannot provide investment advice or recommendations, he welcomes your feedback and invites you to send it to